Final Results

RNS Number : 4133T

RWS Holdings PLC

13 December 2012

RWS Holdings plc

Preliminary results for the year ended 30 September 2012

RWS Holdings plc, Europe's leading provider of intellectual property support services (patent translations and technical searches) and technical translations, today announced its preliminary results for the year ended 30 September 2012.

Financial Highlights:

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

· Sales increased by 5.2% to £68.8m (2011: £65.4m)

o 7.7% increase on a constant currency basis to £70.0m (2011: £65.0m).

· Adjusted operating profit* was up 4.3% to £16.8m (2011: £16.1m).

· Adjusted profit before tax* rose by 6.2% to £17.2m (2011: £16.2m) despite:

o £58k reduction in interest income and a negative swing in foreign exchange losses of £0.4m.

· Adjusted earnings per share* increased by 14% to 31.0p (2011: 27.2p).

· Final dividend of 13.48p (2011: 11.75p); total dividend increased by 13.6% to 17.5p (2011: 15.4p), continuing an unbroken series of double digit dividend increases since flotation.

· Net cash at year end of £25.1m (2011: £24.8m), after acquisitions amounting to £6.2m.

* before amortization of intangibles.

Operational Highlights:

Strong progress, both organically and by acquisition

Organic progress

· Strong momentum in our patent translation business, with a number of significant client wins.

· Chinese business delivered an 80% increase in profits.

· Japanese business delivered a 42% increase in profits.

· German and Swiss technical translations achieved a recovery in profits in the second half.

· PatBase gross subscription revenues grew by 13.2% and margins advanced by 240 bps.

Acquisitions during the period:

· £3.7m acquisition of one third interest in inovia Holdings Pty Limited in October 2011; contributed translation revenues somewhat ahead of our expectations in the six months to 30 September 2012.

· £2.5m acquisition of Davda Associates Limited, announced in June 2012.

Current trading and outlook:

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

· Continuing positive trends in worldwide patent applications.

· Remaining two thirds of inovia to be acquired in September 2013.

Executive Chairman Andrew Brode commented on current trading and outlook:

"The Group has delivered strong cash generation, profit growth and a double digit increase in dividends, whilst having continued to invest in the future of the business, despite a challenging economic environment.

"We have had a strong start to the new financial year, in line with management's expectations and well ahead of 2011. Whilst RWS is not immune to the fragile global economic situation, especially in the Eurozone, we expect to continue to make good progress in the current year as we realise the full year benefit of 2012 client wins, the ongoing rationalisation in Germany, the flow of translation work from inovia and the Davda acquisition.

"With a healthy pipeline of opportunities in our core business and inovia's considerable growth prospects, we are confident that we will materially enhance the Group's leading position in the intellectual property arena over the near to medium term."

A meeting for analysts will be held today at 9.30am 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 8794

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, 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 and Beijing, and is listed on AIM, the London Stock Exchange regulated market (RWS.L).

RWS also has a one third interest in 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 62 jurisdictions in 84 countries.

Approximately 2,000,000 patent applications are filed per annum. The 244,000 applications filed in Europe (source: European Patent Office), represent a doubling in the last ten years. 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 2012

Executive Chairman's Statement

It gives me great pleasure to be able to report another year of progress for RWS against a challenging and volatile economic backdrop. For its ninth consecutive year as a public company it has 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 Japan grew significantly, whilst PatBase was the primary driver of growth within the Group's information services business.

Business Overview

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, 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 has two principal business activities; Translations, which accounts for over 90% of sales and incorporates patent, commercial and technical translation services, and 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 a subscription service.

Strategy

Our strategy is focused upon organic growth complemented by deploying the Group's substantial cash holdings for selective acquisitions, providing they 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. Whilst the global number of applications fell modestly during the recession of 2008/2009, it recovered in 2010, reached new record levels in 2011 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 technical 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.

Results and Financial Review

The Group has achieved a further improvement in underlying operational performance, reflecting continued growth in the core patent translations business, together with excellent profits in China and Japan, a second-half recovery in Germany, and further growth in its database subscription service - PatBase.

Sales advanced by 5.2% to £68.8m (2011: £65.4m), a creditable achievement in competitive market conditions. On a constant currency basis, the growth in sales was 7.7% to £70.0m (2011: £65.0m). Adjusted operating profit before amortization of intangibles was up 4.3% to £16.8m (2011: £16.1m). Adjusted profit before tax and intangibles amortization rose by 6.2% to £17.2m (2011: £16.2m), despite a further reduction in interest income of £58k and a negative movement in foreign exchange losses of £0.4m, giving rise to a 14% increase in adjusted earnings per share to 31.0p (2011: 27.2p) There was no change during 2012 in the number of shares in issue. Reported profit before tax was £16.6m (2011: £15.6m), a rise of 6.4%, and basic earnings per share 29.9p (2011: 26.2p), a rise of 14.1%. The effective tax rate was 23.6% (2011: 29.1%); the reduction was due to the fall in corporation tax rates and prior year over provisions including the effect of capital allowances in excess of depreciation on which no deferred tax was recognised.

At 30 September 2012, shareholders' funds had reached £63.2m (2011: £58.1m), of which net cash represented £25.1m (2011: £24.8m). The movement in net cash reflects an underlying increase of £6.5m before an outlay of £6.2m in respect of acquisitions. The significant other cash outlays included corporation tax of £4.3m, the final dividend for 2011 and the interim dividend for 2012, totalling £6.7m.

RWS' policy was to hedge its net trading exposure to the Euro at an average rate of 86.9p per Euro during 2011/12. Looking forward, RWS has hedged that exposure at 1 Euro = 86.3p until 31 January 2013, and will seek further suitable hedges. As regards the US$ exposure, the Group is accumulating US$ balances as a natural hedge against the inovia earn-out liability in 2013.

Interest income on the Group's substantial cash balances reduced further with the Bank of England maintaining a base rate of 0.5% throughout the financial year.

Dividend

The Board recommend a final dividend of 13.48p per share. The interim dividend, paid in July, was 4.02p per share, so that the total payout in respect of the year will amount to 17.5p per share, an increase of 13.6% over 2011, reflecting the growth in Group earnings during 2012 and the Board's confidence in the continued progress of the Group.

The proposed total dividend per share is 1.71 times covered by basic earnings per share. Subject to shareholder approval at the Annual General Meeting, the final dividend will be paid on 22 February 2013 to all shareholders on the register at 25 January 2013.

Operating Review

Translations

The Group's core patent translations business, which accounts for approximately 70% of Group sales, grew its revenues by 6.8% to £48.4 million (2011: £45.3 million) despite the continued economic uncertainty. 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 2011 and 14 of the top 20 applicants at the European Patent Office in 2011. We are particularly pleased with our recent progress in strengthening our new business pipeline with wins including a renowned Japanese consumer electronic products group, a leading Japanese pharmaceutical company (which we hope will be a reference point to engender future success in Japan) and a UK-based top tier intellectual property law firm. We are also pleased to have been re-awarded significant volumes of work from two clients on quality grounds after a period where orders had been placed elsewhere, on price considerations.

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, 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 58% increase in revenues and an 80% increase in profits. Given this demand, we have continued to invest in staff, training and systems to develop our services, which are primarily focussed on European and North American corporates' patent applications for filing in China and are typically sourced from our other offices. Similarly, our Tokyo based patent translation activities increased revenues by 18% and profits by 42% and we have invested during the year in both strengthening the management team and expanding its resource base.

Our commercial translations business, which accounts for approximately 23% of Group sales, delivered stable revenues of £15.5 million (2011: £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 acceptable margins. During the year we saw an encouraging performance in medical translations, and large projects for existing clients at major EU institutions, offset by the previously reported weak performance in our Berlin operations in the first half of the year, and a continued competitive environment for government work. As reported on 12 October 2012, having taken steps to improve profitability in our German operations, the performance improved in the second half of the financial year, with a broader operational review underway to optimise the business' performance going forward, supported by investment in their technology based services.

Information

Our information business, which accounts for 7% of Group sales and a significantly higher proportion of operating profit, grew its revenues by 8.7% to £5.0 million (2011: £4.6 million). This performance was primarily driven by the 13.2% growth in subscription revenues from PatBase, our subscription patent database service. Our investment in improving its searchability and coverage enabled us to secure a strong level of new subscriptions during the year as well as an increase of the number of users within existing client accounts. The strong growth in revenues, combined with the scalability and operational gearing of PatBase, has enabled it to increase margins by 240 bps and to grow to contribute almost 14% of Group profits.

Our patent search and watch services, which now account for approximately a third of the information revenues, have a greater sensitivity to the economic environment as reflected in an approximate 10% decline in revenues during the year.

Acquisitions

Progress on inovia Acquisition

In line with the Board's stated strategy, RWS announced on 11 October 2011 the acquisition of an initial one third interest in inovia Holdings Pty Limited ("inovia"), a leading provider of web-based international patent filing solutions, and an agreement to acquire the remaining share capital, for a maximum aggregate price of US$31.2m.

The total cash consideration comprises an initial payment of US$5.8 million (or £3.7 million) and deferred consideration for the remaining two thirds of the issued share capital, which will be calculated according to an agreed earnout formula and payable in September 2013. The deferred consideration is capped at a maximum of US$25.4 million, which will become due if revenues of not less than US$29 million and adjusted EBITDA of not less than US$5.4 million are delivered by the business for the year ended 30 June 2013.

For the year ended 30 June 2012, inovia's gross revenues were US$19.3m, an increase of 28% over 2011 and it achieved a maiden EBITDA of US$0.44m. As at 30 June 2012, the business had net assets of US$1.4 million. inovia has made a strong start to its current financial year and for the four months to 31 October 2012 gross revenues were $7.7m, 22% ahead of the corresponding period in 2011.

A key aspect of the inovia transaction for RWS is the ability of the inovia filing service to generate translation revenues. From March 2012, inovia began to direct translation orders to RWS resulting in sales in excess of £1m and somewhat ahead of our initial expectations. This level of activity has accelerated since 30 September 2012.

Market Update

Statistics recently issued by the European Patent Office and the World Intellectual Property Organisation point to an upturn in the number of patent applications in 2010 and 2011 following two years of recession induced decline, an encouraging sign that research and development and the protection of intellectual property rights have remained a priority during and after the global downturn.

In April 2012, the European Patent Office published figures showing 244,000 European patent applications were filed in 2011, a record in its 35 year history and a 3.7% increase over 2010.

In May 2012, the World Intellectual Property Organisation reported that 182,350 international patent applications were filed under its Patent Cooperation Treaty (PCT) in 2011, an increase of 11% over 2010.

Principal Risks

The Directors, having further reviewed the Group's risk profile, remain 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), and in regulatory changes to patent translation requirements in Europe. 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/Dollar hedging has been suspended in advance of the full acquisition of inovia in September 2013 and Sterling/Euro exposure is hedged to 31 January 2013 at 1 Euro = 86.3p.

· The London Agreement was implemented in May 2008 and the four financial years thereafter have borne the full effect, which was broadly in line with management expectations. RWS would also be impacted if a further initiative - the European Union Patent - were to become effective. This latter initiative was declared illegal by the European Court of Justice in March 2011, but the majority of European governments continue to seek ways to circumvent this ruling. Whilst the inovia acquisition would also be impacted by the proposed European Union Patent, its key business territories are outside of Europe. 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 2014, and is highly unlikely to be adopted by RWS' major clients for a number of years thereafter.

· 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.

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; headcount has now reached 497 full time equivalents (2011: 493) and productivity continues to improve.

Directorate Change

RWS announced on 29 November 2012 that Mike McCarthy, who has been with the Group for over 12 years as Finance Director, would retire with effect from 31 December 2012. We also announced the appointment of Richard Thompson as Chief Financial Officer with effect from 1 January 2013. Since Richard joined the Group on 1 November, he has been familiarising himself with the Group's financial activities.

The Board, employees and shareholders are indebted to Mike for his high professional integrity, commitment and stewardship. We wish him well in his retirement years.

Corporate Social Responsibility

RWS seeks to be a socially responsible company 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 strong start to the new financial year, in line with management's expectations and well ahead of 2011. Whilst RWS is not immune to the fragile global economic situation, especially in the Eurozone, we expect to continue to make good progress in the current year as we realise the full year benefit of 2012 client wins, the ongoing rationalisation in Germany, the flow of translation work from inovia and the Davda acquisition.

With a healthy pipeline of opportunities in our core business and inovia's considerable growth prospects, we are 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

12 December 2012

Consolidated Statement of Comprehensive Income

for the year ended 30 September

	Note	2012 £'000	2011 £'000
Revenue	3	68,825	65,394
Cost of sales		(39,614)	(36,914)
Gross profit		29,211	28,480
Administrative expenses		(13,035)	(12,953)
Profit from operations		16,176	15,527
Analysed as:
Operating profit before charging:		16,773	16,097
Amortization of customer relationships and trademarks		(597)	(570)
Profit from operations		16,176	15,527
Finance income		405	210
Finance expense		(1)	(98)
Share in results of associate		18	-
Profit before tax		16,598	15,639
Taxation expense	4	(3,925)	(4,545)
Profit for the year		12,673	11,094
Other comprehensive (expense)/income
(Loss)/gain on retranslation of foreign operations		(694)	201
(Loss)/gain on retranslation of associates		(135)	-
Total other comprehensive (expense)/income		(829)	201
Total comprehensive income attributable to:
Owners of the parent		11,844	11,295


Basic earnings per Ordinary share (pence per share)	6	29.9	26.2

Consolidated Statement of Financial Position

at 30 September

Registered company 3002645	Note	2012 £'000	2011 £'000
Assets
Non-current assets
Goodwill		14,053	13,057
Intangible assets		4,274	3,589
Property, plant and equipment		13,285	13,530
Investment in associate		4,345	-
Deferred tax assets		228	246
		36,185	30,422
Current assets
Trade and other receivables		14,612	14,485
Foreign exchange derivatives		260	7
Cash and cash equivalents		25,096	24,845
		39,968	39,337
Total assets		76,153	69,759
Liabilities
Current liabilities
Trade and other payables		8,015	7,434
Income tax payable		2,007	2,141
Put and call option liability		769	-
Provisions		336	486
		11,127	10,061
Non-current liabilities
Other creditors		100	-
Provisions		530	547
Deferred tax liabilities		1,167	1,093
		1,797	1,640
Total liabilities		12,924	11,701
Total net assets		63,229	58,058
Equity
Capital and reserves attributable to owners of the parent
Share capital		2,116	2,116
Share premium		3,583	3,583
Reverse acquisition reserve		(8,483)	(8,483)
Foreign currency reserve		1,481	2,310
Retained earnings		64,532	58,532
Total equity		63,229	58,058

Consolidated Statement of Changes in Equity

for the year ended 30 September

	Share capital £'000	Share premium account £'000	Other reserves £'000	Retained earnings £'000	Total equity Attributable to owners of the parent £'000
At 1 October 2010	2,116	3,583	(6,374)	53,320	52,645
Dividends	-	-	-	(5,882)	(5,882)
Profit for the year	-	-	-	11,094	11,094
Currency translation differences	-	-	201		201
At 30 September 2011	2,116	3,583	(6,173)	58,532	58,058
Dividends	-	-	-	(6,673)	(6,673)
Profit for the year	-	-	-	12,673	12,673
Currency translation differences	-	-	(829)	-	(829)
At 30 September 2012	2,116	3,583	(7,002)	64,532	63,229

Other reserves

	Foreign currency reserve £'000	Reverse acquisition reserve £'000	Total other reserves £'000
At 1 October 2010	2,109	(8,483)	(6,374)
Currency translation differences	201	-	201
At 30 September 2011	2,310	(8,483)	(6,173)
Currency translation differences	(829)	-	(829)
At 30 September 2012	1,481	(8,483)	(7,002)

Consolidated Statement of Cash Flows

for the year ended 30 September

	2012 £'000	2011 £'000
Cash flows from operating activities
Profit before tax	16,598	15,639
Adjustments for:
Depreciation of property, plant and equipment	593	485
Amortization of intangible assets	656	641
Finance income	(405)	(210)
Finance expense	1	98
Operating cash flow before movements
in working capital and provisions	17,443	16,653
Decrease/(increase) in trade and other receivables	63	(420)
Increase in trade and other payables	391	173
Cash generated from operations	17,897	16,406
Income tax paid	(4,297)	(3,864)
Net cash inflow from operating activities	13,600	12,542
Cash flows from investing activities
Interest received	98	203
Development loan repaid	-	1,500
Acquisition of subsidiary, net of cash acquired	(2,480)	-
Acquisition of share in associate	(3,693)	-
Purchases of property, plant and equipment	(363)	(1,589)
Purchases of intangibles (computer software)	(92)	(34)
Net cash (outflow)/inflow from investing activities	(6,530)	80
Cash flows from financing activities
Dividends paid	(6,673)	(5,882)
Net cash outflow from financing activities	(6,673)	(5,882)
Net increase in cash and cash equivalents	397	6,740
Cash and cash equivalents at beginning of the year	24,845	17,908
Exchange (losses)/ gains on cash and cash equivalents	(146)	197
Cash and cash equivalents at end of the year	25,096	24,845

Free cash flow
Analysis of free cash flow
Net cash generated from operations	17,897	16,406
Net interest received	98	203
Income tax paid	(4,297)	(3,864)
Purchases of property, plant and equipment	(363)	(1,589)
Purchases of intangibles (computer software)	(92)	(34)
Free cash flow	13,243	11,122

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 2012, from which this financial information has been extracted, and for the comparative year ended 30 September 2011, 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 2012 and the year ended 30 September 2011 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 2011 have been delivered to the Registrar of Companies and those for the year ended 30 September 2012 will be delivered shortly, having been approved by the Directors on 12 December 2012. The auditors have reported on the accounts for the years ended 30 September 2011 and 30 September 2012; 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 2011.

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 14 January 2013.

3. Segment information

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

	2012 £'000	2011 £'000
UK	8,584	7,729
Continental Europe	43,461	44,177
Asia and United States of America	16,780	13,488
	68,825	65,394

4. Taxation

	2012 £'000	2011 £'000
Taxation recognised in the income statement is as follows:
Current tax expense
Tax on profit for the current year
- UK	3,714	3,905
- Overseas	644	596
Adjustment to prior years	(250)	120
	4,108	4,621
Deferred tax
Current year movement	(238)	(76)
Prior year movement	55	-
Total tax expense in the Statement of Comprehensive Income	3,925	4,545

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

	2012 £'000	2011 £'000
Profit before tax	16,598	15,639
Notional tax charge at UK corporation tax rate of 25% (2011: 27%)	4,150	4,222
Effects of:
Items not deductible or not chargeable for tax purposes	(67)	131
Differences in overseas tax rates	163	131
UK tax rate change	(71)	(59)
Adjustments in respect of prior periods	(250)	120
Total tax expense for the year	3,925	4,545

5. Dividends to shareholders

2012

pence

per

2012

£'000

2011

pence

per

2011

£'000

Final, paid 17 February 2012 (2011: paid 18 February 2011)

11.75

4,972

10.25

4,337

Interim, paid 20 July 2012 (2011: paid 15 July 2011)

4.02

1,701

3.65

1,545

15.77

6,673

13.90

5,882

The Directors recommend a final dividend in respect of the financial year ended 30 September 2012 of 13.48 pence per Ordinary share to be paid on 22 February 2013 to shareholders who are on the register at 25 January 2013. This dividend is not reflected in these financial statements as it does not represent a liability at 30 September 2012. The final proposed dividend will reduce shareholders' funds by an estimated £5.7 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:

	2012	2011
Weighted average number of Ordinary shares in issue for basic earnings	42,315,968	42,315,968

Adjusted earnings per Ordinary share is also presented to eliminate the effects of amortization of customer relationships and trademarks. 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:

	2012 £'000	2011 £'000	2012 Basic earnings per share pence	2011 Basic earnings per share pence
Profit for the year	12,673	11,094	29.9	26.2
Amortization of customer relationships and trademarks (after tax)	460	422	1.1	1.0
Adjusted earnings	13,133	11,516	31.0	27.2