Final Results

RNS Number : 2781I

RWS Holdings PLC

08 December 2015

 

                                                                                                                                    8 December 2015

RWS Holdings plc

Preliminary results for the year ended 30 September 2015

RWS Holdings plc ("RWS", "the Group"), the world's leading provider of intellectual property support services (patent translations, international patent filing solutions and searches), commercial translations and linguistic validation, today announces its preliminary results for the year ended 30 September 2015.

Financial Highlights:

Delivered profit ahead of market expectations

·         Sales increased organically by 2% to £95.2m (2014: £93.6m)

·      Sales up by 5% on a constant currency basis

·         Adjusted operating profit* was up 4% to £22.9m (2014: £22.0m)

·         Adjusted profit before tax* rose by 3% to £22.7m (2014: £22.1m)

·         Reported profit before tax was up 6% to £20.7m (2014: £19.6m)

·         Adjusted diluted earnings per share* of 8.1p (2014: 8.0p)

·         Final dividend of 3.85p (2014: 3.60p); total dividend increased by 6.6% to 4.88p (2014: 4.58p), continuing an unbroken series of dividend increases since flotation

·         Net cash at year end of £30.6m (2014: £22.5m)

* RWS uses adjusted results as key performance indicators as the directors believe that these provide a more consistent measure of operating performance. Adjusted operating profit and adjusted profit before tax are stated before amortization of intangibles and share option costs.

Operational Highlights:

Continued organic progress and investment for future growth

·      2% increase in core patent translations sales (7% increase in constant currency), reflects:

·      Prior period and 2015 client wins, supported by a spike in patent applications following the 2011 America Invents Act

·      Further strong growth in China and Japan

·        inovia revenues grew by 5% to £20.4m (2014: £19.4m)

·        PatBase subscription revenues grew by 7.5%

·         Continued investment in the Group:

·      Further expansion of Chinese production and training initiatives, sales team and agents

·      PatBase searchability, analytics, content and geographical coverage

·      Creation of patent translation facility within the German operation

·      Integration and strengthening of joint sales forces in USA and Europe

·         Intellectual property support services accounted for over 80% of Group revenues in 2014/15

Post Year End Acquisition:

As reported on 2 November 2015, RWS acquired 100% of the issued share capital of Corporate Translations Inc ("CTi") for a cash consideration of US$70 million.  CTi is the world's leading translation company focussing exclusively on life sciences translation and linguistic validation.

Andrew Brode, Chairman of RWS commented:

"The Group has delivered sales and profits ahead of expectations and strong cash conversion, marking the twelfth successive year of progress since flotation and it has made a solid start to the new financial year, in line with its expectations.

"The acquisition of CTi in November brought to the Group a market leader in life sciences with a strong platform from which RWS can expand in the US. CTi is performing well and its leadership in a growing market combined with the benefit of RWS' strong foothold in Europe leaves it well placed to deliver further growth in 2016.

"We expect the current financial year to benefit from increasing sales from recent client wins, a healthy pipeline of new client opportunities and from the full integration of inovia in addition to CTi's significant contribution.

"The Board is, therefore, confident in the Group's prospects and expects to report further progress as it continues to consolidate its market leading positions in the steadily growing intellectual property support services space and the life sciences sector."

A meeting for analysts will be held today at 9.30 am at the offices of MHP, 6 Agar Street, London WC2N 4HN.  Please contact MHP by emailing [e-mail] if you would like to attend.

For further information contact:

RWS Holdings plc

Andrew Brode, Chairman                                                                                                    01753 480200

MHP

Katie Hunt / Simon Hockridge                                                                                            020 3128 8100

Numis

Stuart Skinner/Kevin Cruickshank (Nominated Adviser)                                                         020 7260 1000

James Serjeant (Corporate Broker)

About RWS:

RWS is the world's leading provider of patent translations and one of the leading players in the provision of intellectual property support services and high level technical, medical, commercial, legal and financial translation services and linguistic validation.  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,, pharmaceutical, telecommunications and the Life Science industries.  RWS is based in the UK, with offices in Europe, the USA (New York, Connecticut and Chicago), Tokyo, Beijing and Sydney, and is listed on AIM, the London Stock Exchange regulated market (RWS.L).

For further information please visit: www.rws.com

RWS Holdings plc

Preliminary results for the year ended 30 September 2015

Chairman's Statement

I am pleased to report a further year of progress for RWS despite a far from robust global economic backdrop and continued volatility in currency markets.  For the twelfth consecutive year since listing on AIM in November 2003, we have delivered growth in sales, underlying profits and dividends, testimony to the strength of our market position in patent translations and intellectual property services.  During the year, we have also continued to invest in those resources which can deliver future expansion.

Results and Financial Review

The Group has achieved further significant progress in underlying operational performance, reflecting continued growth in the core patent translations business, together with growth in PatBase, inovia, China, Japan and Germany.

Group sales advanced organically by 2% to £95.2m (2014: £93.6m).  In constant currency terms, sales were up by 5%.  Adjusted operating profit before amortization of intangibles and share option costs was up 4% to £22.9m (2014: £22.0m).

Adjusted profit before tax, amortization of intangibles and share option costs increased by 3% to £22.7m (2014: £22.1m).  This produced a 1.3% increase in adjusted earnings per share to 8.1p (2014: 8.0p - restated following the 5:1 share split in February 2015). 

Reported profit before tax was £20.7m (2014: £19.6m), a rise of 6%, reflecting higher amortisation charges which were more than offset by lower share based payment costs. The basic earnings per share were 7.3p (2014: 7.2p), a rise of 1.4%.  The effective tax rate was 24.8% (2014: 22.6%).

At 30 September 2015, shareholders' funds had reached £85.7m (2014: £78.4m), of which net cash represented £30.6m (2014: £22.5m).  The positive movement in net cash is despite significant outlays in respect of corporation tax of £5.1m and the final dividend for 2014 and the interim dividend for 2015 which totalled £9.8m.

Currency Effects and Hedging

Reported revenues were adversely affected by £2.9m of exchange rate movements, resulting from the strong performance of sterling.  The average rate used for conversion of Euro revenues was 74.0p to the € versus 81.5p in 2014.  For the US dollar, the average rate was 1.54 dollars to the £ versus 1.66 dollars in 2014.

RWS's normal policy is to hedge its net trading exposure to the Euro, and since the inovia acquisition, to the US$.  Looking forward, RWS has hedged its estimated Euro exposure from 1 October 2015 to 31 December 2015 at an average rate of 1 Euro = 80.3p and from 1 January 2016 to 31 March 2016 at a rate of 1 Euro = 72.0p.  The post balance sheet acquisition of CTi involved a combination of US$ debt and Group cash.  The Group's US$ revenues are now naturally hedged by the interest payment on the US$ debt.

Share Split

Further to consultations with the Group's brokers in late 2014, the Directors decided that an enlarged number of ordinary shares with a lower price per share would improve the marketability and liquidity of RWS' shares.  A 5 for 1 share split, therefore, took effect from 11 February 2015 following shareholders' approval at the Group's AGM.  All comparative per share calculations in respect of 2014 have been adjusted to reflect the split.

Dividend

I am pleased to announce that the Board has recommended a final dividend of 3.85p per share.  The interim dividend, paid in July, was 1.03p per share, so that the total payout in respect of the year will amount to 4.88p per share, an increase of 6.6% over 2014, reflecting the Group's earnings growth during 2015 and the Board's confidence in the Group's continued progress.  This proposed payout marks a twelve year unbroken record of increases in the dividend since flotation in November 2003.

The proposed total dividend is 1.5 times covered by basic earnings per share.  Subject to shareholder approval at the Annual General Meeting, the final dividend will be paid on 26 February 2016 to all shareholders on the register at 29 January 2016.

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 over 4% of the Group's share capital have been issued to ten participants, with a subscription price of 129.2p per share.  The earliest vesting date is 3 April 2015 and the latest exercise date is 3 April 2021.  No options were exercised during the year.

Post Year End Acquisition

The Group announced on 2 November 2015 that it had acquired the entire issued share capital of Corporate Translations Inc ("CTi") for a cash consideration of US$70m.  This acquisition is in line with our stated strategy of complementing organic growth with selective acquisitions which have growth prospects in attractive sectors and/or geographies, offer excellent margins and enhance shareholder value.

The acquisition of CTi establishes a significant Group presence in the USA which the Board believes is the largest growth opportunity for RWS.  CTi is the world's leading life sciences translation and linguistic validation provider.  It enjoys a preferred supplier relationship with many of its key clients, with extraordinary penetration of the blue chip life science community.  CTi's greater scale, combined with the existing RWS specialist divisions, will immediately further enhance the Group's competitive standing amongst the largest specialist translation companies in the world, whilst RWS' strong foothold in Europe will support CTi's expansion into the European life science sector.

The acquisition of CTi is expected to be immediately and significantly earnings enhancing, with the US$70m consideration based upon CTi reporting not less than US$7m EBITDA for the year ended 31 December 2015.  In the previous year, adjusted EBITDA was US$4.8m.

Funding for the acquisition was via a combination of a US$45m five year bank loan and the Group's internal cash resources.

People

The very nature of the Group's activities dictate that it will always be dependent upon the quality and dedication of its entire staff to meet the demands for high quality and timely delivery required by its worldwide clients.  Group headcount reached 621 full time equivalents at the year end (2014: 605) and will be significantly enlarged with the addition of 140 new colleagues following the acquisition of CTi.  I wish to place on record my thanks to all of them for their contribution.

I am also pleased to announce that Richard Thompson, the Group's Chief Financial Officer, has additionally been appointed as Deputy Chief Executive Officer, and will assume direct responsibility for the integration of CTi into the Group.

Queen's Award

On 1 July 2015, RWS was honoured to receive a visit from HRH the Duke of Gloucester to present to us the Queen's Award for Enterprise in International Trade 2015 - the fifth occasion upon which we have received such recognition, and further testimony to the commitment of our people.

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 colleagues who reflect 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's staff contribute generously on a monthly basis to a wide selection of local and national charities chosen by the staff, and their contributions are matched by the Group.

Current Trading and Outlook

The Group has made a solid start to the new financial year, in line with its expectations and we expect the current financial year to benefit from increasing sales from recent client wins, a healthy pipeline of new client opportunities and from the full integration of inovia in addition to CTi's contribution.

The Board is, therefore, confident in the Group's prospects and expects to report further progress as it continues to consolidate its market leading position in the steadily growing intellectual property support services space and the life sciences sector.

Andrew Brode

Chairman

8 December 2015

Strategic Report

Business Model

RWS is the world's largest provider of patent translations and one of the leading players in the provision of intellectual property support services and high level technical and commercial translation services.  It has a blue chip multinational client base spanning Europe, North America and Asia, particularly active in patent filing in the medical, pharmaceutical, chemical, aerospace, defence, automotive and telecoms industries.  The Group's principal business activities are:

·      Patent translations, which currently accounts for over 55% of Group revenue.  RWS differentiates itself from the competition through the quality of its translations and the high level of customer service and support it provides.  Uniquely, it employs over 100 full time highly qualified translators.

·      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.

·      International web based patent filing solutions via the inovia platform.  This activity is expected to grow and continue to be a significant source of patent translation revenues for the RWS Group.

·      Commercial translations, with a particular emphasis on technical translations.

Following the acquisition of CTi, the Group has become the world's leading provider of translation and linguistic validation services to the Life Sciences sector.

With effect from 1 October 2015, the Group completed the integration of the inovia patent filing business into its patent translation business. This integration both reflects customer feedback and was a logical step in order to simplify the Group's sales and product offering, such that all sales team members now sell the full portfolio of the Group's products and services. As a result, the patent translation and inovia filing activities will be managed as a single entity and we will be reporting their financial results under one new segment, 'Patent translations and filing'.

Our Strategy

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

Our strategy to achieve this is focused upon organic growth complemented by 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 development of new drugs by the pharmaceutical industry

·      corporates, law firms and attorneys outsourcing all or part of the foreign patent search, filing and translation process

·      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 and in new and/or growing geographies

·      increasing market share in particular for patent translation and filing solutions worldwide

·      the retention of our client base, which includes the majority of the top 20 patent filers both in Europe and globally, many of which will use the Group for substantially all of their patent translation requirements, and

·      the addition of new clients each year with whom activity levels build up over time.

In terms of acquisitive growth, we continue to search for suitable potential acquisitions in the intellectual property support services and specialist commercial translation spaces, with our primary focus currently on the USA.  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 and translation services. 

We are particularly pleased to be able to show our progress against these stated objectives with 12 straight years of sales and profit growth:

Year ending 30 Sep	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015
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	93.6	95.2
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	22.1	22.7

Operating Review

Patent Translations

The Group's core patent translations business represents approximately 55% of Group sales and grew underlying revenues by 2% to £52.9m, or 7% in constant currency terms (2014: £52.0m).  This performance reflects earlier client wins, organic growth from the established client base, an increase in patent applications following the 2011 America Invents Act and further strong growth in China and Japan.  The macroeconomic background delivered further grounds for confidence with record numbers of new patent applications in 2014.

The Group has enhanced its market leadership within its chosen niche of servicing a worldwide blue-chip client base, embracing many of the world's leading patent filers.  As evidence of this leading role, the Group serviced 10 of the top 15 applicants at the World Intellectual Property Office and 11 of the top 15 applicants at the European Patent Office in 2014.  Following the acquisition of inovia in September 2013, we have been able to combine the direct sales efforts of RWS and inovia in the US (the largest market for intellectual property support services) and Europe and are increasing our combined sales activities in Asia.  China continues to attract North American and European patent filers seeking patent protection there, as a result of which our headcount in China has grown to 63 employees.  We have continued to develop the production and training centres with three Chinese universities.  These centres enable the Group to expand its Chinese offering but at a lower cost than in Beijing.  Our long term relationship with international patent bodies seeking to enlarge their collections of translated Chinese patent prosecution documents has also prospered.

inovia

inovia was acquired in September 2013.  It is the largest non law firm processor of international patent applications in the world.  The strategic importance of inovia to the Group lies in its ability to generate incremental patent translation revenues from its internet based patent filings.  In 2015 inovia achieved sales of £20.4m (2014: £19.4m) a rise of 5%, and generated patent translation transfer revenues of £4.6m (2014: £4.3m).

We have now completed the integration initiatives we outlined in our half year results announcement which included integrating inovia and RWS's client portal interfaces, linking inovia's portal into Group clients' intellectual property management systems, introducing translation technology into inovia's technology platform to better facilitate large client wins, fully integrating inovia and RWS's sales teams and consolidating our suppliers and services.

As a full member of the RWS Group, inovia is pressing ahead with tailored offerings to larger corporates who are often already RWS clients.  Whilst inovia's core market in the USA offers superior margins, further penetration of larger corporates worldwide will be an important growth and market share opportunity, whilst also generating additional higher margin translation revenue, and can improve client retention rates.

In October 2015, inovia was recognised for the second year running as the leading foreign filing provider by Managing Intellectual Property magazine's annual ranking of the top Patent Cooperation Treaty (PCT) firms. We are confident that we have put the structure in place to enable inovia to continue to build on its leading position and deliver growth for the wider Group.

Commercial Translations

The commercial translations business, which accounts for 17% of Group sales and operates in the UK, Germany and Switzerland, reported broadly flat revenues of £15.9m (2014: £16.1m) having experienced currency headwinds and cyclical downturns, although revenues were up by 4% on a constant currency basis with our German business achieving 2% sales growth in the year, or 11% sales growth on a constant currency basis.  We have grouped all non-patent translations in this division and it remains the segment of our business most exposed to competition.  Given the intensity of the competition, we continue to focus upon specialist niches and larger projects where the Group's resources and expertise can provide a competitive edge.  We have now established an into-German patent translation facility in the Berlin office, which will balance the cyclical effect evident in the commercial translation activities and improve margins through better utilisation of existing resources.  The commercial translation business does enable RWS to offer customers a complete solution to their translation needs whilst continuing to provide good cross selling opportunities for the patent translation business.

Information

The information business accounts for 6% of Group sales and reported revenues of £6.0m reflecting several successful client wins and a good flow of regular work from a number of clients which almost offset the exceptional order volumes from our largest search client which had benefited the comparative period (2014: £6.2m) but which have now returned to normal levels, as previously reported.   The high margin subscription service - PatBase - grew by 7.5% during the year.  We have continued to invest in PatBase searchability, content, analytics and geographic coverage and in securing the resilience and robustness of the platform which provides 24/7 worldwide access.

Market Update

Patent Filing Statistics

The USA and China again drove record-level patent-filing activity under the Patent Cooperation Treaty (PCT) in 2014 as the number of annual international patent applications reported by the World Intellectual Property Office (WIPO) showed a 4.5% increase to 214,500 (2013: 205,300).  The European Patent Office (EPO) also published record numbers, with the total number of European patent filings increasing by 3. 2% to 274,174 in 2014 (2013: 265,690).  The overall trend looks to continue in 2015, with Chinese PCT application numbers up by 20.0% in the first 8 months of 2015 and applications filed in China up by 21.8% over the same period in the prior year. Total patent applications worldwide reached well over 2.5m in 2014.

Risk Management

The Group maintain a risk register which is reviewed and assessed on an annual basis by the Board of Directors.  The key 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 the failure to successfully integrate acquired businesses 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.

·        As previously reported, currency risk is partly mitigated via hedging operations.

·        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 hurdles, the Unitary Patent has been making further progress.  There appears to be consensus now that the earliest implementation would be in 2017.  It should be noted that a number of member states of the current European Patent system are not EU members.  Professional opinion remains highly sceptical both as regards jurisdiction and actual financial benefits for applicants which do not require Europe-wide patent coverage.  Because the proposed Unitary Patent will run in parallel with the existing system, it will not provide any financial advantage to many corporates seeking patent protection in only selected key countries, and will have a new and untried litigation system.  Our research indicates that there is currently only marginal interest amongst large corporates and their professional advisers in full adoption of the new system.  That being the case, we anticipate minimal incremental loss of revenues in the first few years after the introduction of the Unitary Patent.

·        In September 2013 RWS acquired the inovia business and the subsequent integration, which focused on several areas, is now complete.  The supplier and service consolidations have reduced technical costs and improved underlying margins, whilst our combined input into new technical developments ensured maintenance of our leading market position and helped to increase the attractiveness of our technical solutions for new markets and existing RWS customers.  In addition, selected cross-selling opportunities have brought in new clients and continue to enhance our pipeline. The experience gained from this successful inovia integration will be utilised during the combination of CTi and certain RWS businesses.

·        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, as evidenced by the exceptionally low unemployment statistics for the area.

RWS Holdings plc

Annual Report 2015

Consolidated Statement of Comprehensive Income

for the year ended 30 September

	Note	2015 £'000	2014 £'000
Revenue	3	95,215	93,556
Cost of sales		(57,706)	(56,783)
Gross profit		37,509	36,773
Administrative expenses		(16,677)	(17,187)
Operating Profit		20,832	19,586
Analysed as:
Operating profit before charging:		22,894	22,036
Amortization of customer relationships, trademarks and technology		(1,607)	(1,572)
Share based payment costs		(455)	(878)
Operating Profit		20,832	19,586
Finance income		71	57
Finance costs		(251)	(14)
Profit before tax		20,652	19,629
Taxation expense	4	(5,124)	(4,430)
Profit for the year		15,528	15,199
Other comprehensive income*
Gain/(loss) on retranslation of foreign operations		1,069	(618)
Total other comprehensive income/(expense)		1,069	(618)
Total comprehensive income attributable to:
Owners of the parent		16,597	14,581
Basic earnings per Ordinary share (pence per share)	6	7.3	7.2
Diluted earnings per Ordinary share (pence per share)	6	7.3	7.1

*Other comprehensive income includes only items that will be subsequently reclassified to Profit before tax when specific conditions are met.

RWS Holdings plc

Annual Report 2015

Consolidated Statement of Financial Position

at 30 September

Registered company 3002645		2015 £'000	2014 £'000
Assets
Non-current assets
Goodwill		31,445	30,512
Intangible assets		6,836	8,228
Property, plant and equipment		17,732	17,310
Deferred tax assets		340	353
		56,353	56,403
Current assets
Trade and other receivables		17,907	16,385
Foreign exchange derivatives		309	554
Cash and cash equivalents		30,569	22,479
		48,785	39,418
Total assets		105,138	95,821
Liabilities
Current liabilities
Trade and other payables		14,797	12,277
Income tax payable		2,417	2,198
Provisions		77	480
		17,291	14,955
Non-current liabilities
Other payables		30	30
Provisions		301	378
Deferred tax liabilities		1,826	2,024
		2,157	2,432
Total liabilities		19,448	17,387
Total net assets		85,690	78,434
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		1,801	1,346
Reverse acquisition reserve		(8,483)	(8,483)
Foreign currency reserve		1,638	569
Retained earnings		85,035	79,303
Total equity		85,690	78,434

RWS Holdings plc

Annual Report 2015

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 2013	2,116	3,583	(6,828)	72,842	71,713
Profit for the year	-	-	-	15,199	15,199
Currency translation differences	-	-	(618)	-	(618)
Total Comprehensive income for	-	-	(618)	15,199	14,581
the year 30 September 2014
Dividends	-	-	-	(8,738)	(8,738)
Credit arising on share based payments	-	-	878	-	878
At 30 September 2014	2,116	3,583	(6,568)	79,303	78,434
Profit for the year	-	-	-	15,528	15,528
Currency translation differences	-	-	1,069	-	1,069
Total Comprehensive income for	-	-	1,069	15,528	16,597
the year ended 30 September 2015
Dividends	-	-	-	(9,796)	(9,796)
Credit arising on share based payments	-	-	455	-	455
At 30 September 2015	2,116	3,583	(5,044)	85,035	85,690

Other reserves	Share based payment reserve  £'000	Reverse acquisition reserve £'000	Foreign currency reserve £'000	Total other reserves £'000
At 1 October 2013	468	(8,483)	1,187	(6,828)
Other Comprehensive loss for the year	-	-	(618)	(618)
Credit arising on share based payments	878	-	-	878
At 30 September 2014	1,346	(8,483)	569	(6,568)
Other Comprehensive gain for the year	-	-	1,069	1,069
Credit arising on share based payments	455	-	-	455
At 30 September 2015	1,801	(8,483)	1,638	(5,044)

The nature and purpose of each reserve within equity is as follows:

- Share capital is the nominal value of the shares issued.

- Share premium is the amount received for shares issued in excess of their nominal value.

- Share based payment reserve is the credit arising on the share based payment charges in relation to the Company's

  share option schemes.

- Foreign currency reserve is the cumulative gain or loss arising on retranslating the net assets of overseas operations

  into sterling.

- Reverse acquisition reserve was created when RWS Holdings plc became the legal parent of Bybrook Limited.  The

  substance of this combination was that Bybrook Limited acquired RWS Holdings plc.

- Retained earnings are the cumulative net gains and losses, including the capital reserve from the Company balance

  sheet.

RWS Holdings plc

Annual Report 2015

Consolidated Statement of Cash Flows

for the year ended 30 September

	Note	2015 £'000	2014 £'000
Cash flows from operating activities
Profit before tax		20,652	19,629
Adjustments for:
Depreciation of property, plant and equipment		824	599
Amortization of intangible assets		1,663	1,632
Share based payment costs		455	878
Finance income		(71)	(57)
Finance expense		251	14
Operating cash flow before movements
in working capital and provisions		23,774	22,695
(Increase)/decrease in trade and other receivables		(1,529)	64
Increase in trade and other payables and provisions		2,037	503
Cash generated from operations		24,282	23,262
Income tax paid		(5,091)	(5,239)
Net cash inflow from operating activities		19,191	18,023
Cash flows from investing activities
Interest received		76	108
Purchases of property, plant and equipment		(1,258)	(4,919)
Purchases of intangibles (computer software)		(33)	(78)
Net cash outflow from investing activities		(1,215)	(4,889)
Cash flows from financing activities
Dividends paid	5	(9,796)	(8,738)
Net cash outflow from financing activities		(9,796)	(8,738)
Net increase in cash and cash equivalents		8,180	4,396
Cash and cash equivalents at beginning of the year		22,479	18,305
Exchange losses on cash and cash equivalents		(90)	(222)
Cash and cash equivalents at end of the year		30,569	22,479
Free cash flow
Analysis of free cash flow
Net cash generated from operations		24,282	23,262
Net interest received		76	108
Income tax paid		(5,091)	(5,239)
Purchases of property, plant and equipment		(1,258)	(4,919)
Purchases of intangibles (computer software)		(33)	(78)
Free cash flow		17,976	13,134

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

RWS Holdings plc

Annual Report 2015

Notes to the Consolidated Financial Statements (continued)

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 2015, from which this financial information has been extracted, and for the comparative year ended 30 September 2014, 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 2015 and the year ended 30 September 2014 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 2014 have been delivered to the Registrar of Companies and those for the year ended 30 September 2015 will be delivered shortly, having been approved by the Directors on 7 December 2015.  The auditors have reported on the accounts for the years ended 30 September 2014 and 30 September 2015; 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 2014.

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 15 January 2016.

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.

	2015 £'000	2014 £'000
UK	17,637	16,511
Continental Europe	45,308	46,134
Asia, United States of America and Australia	32,270	30,911
	95,215	93,556

4.  Taxation

		2015 £'000	2014 £'000
Taxation recognised in the income statement is as follows:
Current tax expense
Tax on profit for the current year
- UK		3,957	4,077
- Overseas		1,039	717
Adjustment in respect of prior years		288	89
		5,284	4,883
Deferred  tax
Current year movement		(228)	(395)
Prior year movement		68	(58)
Total tax expense in the Statement of Comprehensive Income		5,124	4,430

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

		2015 £'000	2014 £'000
Profit before taxation		20,652	19,629
Notional tax charge at UK corporation tax rate of 20.5% (2014: 22%)		4,234	4,318
Effects of:
Items not deductible or not chargeable for tax purposes		60	(116)
Differences in overseas tax rates		474	139
Adjustments in respect of prior years		356	89
Total tax expense for the year		5,124	4,430

5.  Dividends to shareholders

	2015 pence per share	2015 £'000	2014 *pence per share (restated)	2014 £'000
Final, paid 27 February 2015 (2014: paid 21 February 2014)	3.60	7,617	3.15	6,665
Interim, paid 24 July 2015 (2014: paid 25 July 2014)	1.03	2,179	0.98	2,073
	4.63	9,796	4.13	8,738

At the RWS Holdings plc AGM on 10 February 2015, shareholders approved a resolution to subdivide the Company's existing shares so that each 5p Ordinary share was subdivided into 5 Ordinary shares of 1p each.  These new 1p shares were admitted for trading on the London Stock Exchange on 11 February 2015.

*The dividend payment per share has been restated for the prior year to reflect the share split.

The Directors recommend a final dividend in respect of the financial year ended 30 September 2015 of 3.85 pence per Ordinary share to be paid on 26 February 2016 to shareholders who are on the register at 29 January 2016.  This dividend is not reflected in these financial statements as it does not represent a liability at 30 September 2015.  The final proposed dividend will reduce shareholders' funds by an estimated £8.1 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:

	2015	2014 (restated)
Weighted average number of Ordinary shares in issue for basic earnings	211,579,840	211,579,840
Dilutive impact of share options	1,086,738	2,053,790
Weighted average number of Ordinary shares for diluted earnings	212,666,578	213,633,630

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

	2015 £'000	2014 £'000	2015 Basic earnings per share pence	2014 Basic earnings per share pence (restated)	2015 Diluted earnings per share pence	2014 Diluted earnings per share pence (restated)
Profit for the year	15,528	15,199	7.3	7.2	7.3	7.1
Adjustments post tax
Amortization of customer relationships, trademarks and technology	1,286	1,242	0.6	0.6	0.6	0.6
Charges for share based payment	364	694	0.2	0.3	0.2	0.3
Adjusted earnings	17,178	17,135	8.1	8.1	8.1	8.0

7.  Events since the reporting date

RWS announced on 2 November 2015 the acquisition of the entire share capital of Corporate Translations Inc ("CTi") for a cash consideration of US$70 million plus an estimated US$2 million for working capital.  The acquisition was funded by a US$45 million five year loan and internal cash resources.

It is anticipated that there will be Goodwill arising on the acquisition.

Because the process of fair valuing the CTi business has not been completed as at 7 December 2015, the initial accounting for the business combination is incomplete as at this date.  As a result, the Group is unable to disclose the following information regarding the acquisition:

*  the gross contractual amount, fair value amount, or estimated contractual cash flows not expected to be collected from the receivables acquired;

*  the amount recognised as of the acquisition date for each major class of assets and liabilities acquired;

*  the existence of or the values relating to any contingent liabilities recognised in accordance with IAS 37 on acquisition; and

*  the amount of goodwill acquired and the amount of goodwill that is expected to be deductible for tax purposes.

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