Interim Results

RWS Holdings PLC 08 June 2005 8 June 2005 RWS Holdings plc Interim results announcement For the six months ended 31 March 2005 RWS Holdings plc (RWS), Europe's leading provider of intellectual property support services (patent translations and technical searches) and technical translations, is pleased to announce its unaudited interim results for the period ended 31 March 2005. Highlights: - Sales increased by 10% to £17.2m (new record) - Profit before tax, goodwill and exceptional items increased by 16% to £3.5m (new record) - Normalised earnings per share was 6.4p (on an increased number of shares in issue) - Interim dividend increased by 10% to 1.65p per share - Good cash flow from operating activities; net cash of £9.7m following the recent acquisition of Eclipse - Integration of Eclipse proceeding to plan - Number of patent applications continues to grow - Solid growth throughout the business Executive Chairman, Andrew Brode commented: 'RWS is delighted to be reporting further record financial achievements and growth in its export focused businesses. 'Our financial position is strong as is our order book. The fundamental drivers for the growth of our core business show no signs of weakening and we are confident that our unique specialist skills and reputation will continue to attract existing and new clients. We remain confident of further good progress in the second half of the year.' For further information, please contact: RWS Holdings plc Andrew Brode Tel: 01753 480200 Weber Shandwick Square Mile Nick Oborne Tel: 020 7067 0700 About RWS RWS is Europe's leading provider of intellectual property support services (patent translations and technical searches to the medical, pharmaceutical, chemical, aerospace, defence, automotive and telecoms industries). RWS also provides specialist technical, legal and financial translation services for areas outside the patent arena. RWS is based in the UK with offices in Europe, New York and Tokyo. For further information visit www.rws.com RWS Holdings plc Chairman's Statement ________________________________________________________________________________ I have great pleasure in presenting another record performance by your Company for the six months ended 31 March 2005. Overview of the Business RWS is Europe's leading provider of intellectual property support services and specialist technical, legal and financial translation services. In its core patent translation business RWS translates in excess of 30,000 patents and intellectual property related documents per annum for European, North American and Japanese multinationals. Its blue chip client base includes corporates in the medical, pharmaceutical, chemical, aerospace, defence, automotive and telecoms industries as well as patent agents acting on behalf of similar clients. The Group comprises two divisions, Translations and Information. The Translations' activities account for 90% of revenues (patent and document translation, filing and localisation services); Information offers a comprehensive range of patent search, retrieval and monitoring services. Strategy Organic growth has always been, and will continue to be, the focus of our strategy as we build market share through the exploitation of our leading position and reputation. We will endeavour to make selective acquisitions should they offer profitable growth and enhanced shareholder value. The Marketplace Official statistics confirm that the number of patent applications continues to grow year on year. The patent translation market is highly fragmented and competition is largely provided by freelance translators. No competitor delivers the same breadth and quality of service in both patent translation and technical search. RWS therefore believes the barriers to entry are significant. RWS does face competition in the market for non-patent technical translations both from corporates and freelances. This sector represents approximately 10% of our sales revenues and we are a major player with an excellent reputation. The acquisition of Eclipse Translations is designed to underpin our presence in this market segment. Operating and Financial Review We have continued to experience strong demand for our specialist translation services, adding new clients and additional repeat business. Our core European Translation and Filing service (ETF) showed further growth. Our Japanese operations performed well with growth in our Japanese Translation and Filing service (JTF) coming from European and US-based multinationals and work for Japanese corporates exceeding our expectations. Eclipse was acquired in February and has exceeded its budgets since acquisition. The Information Division performed to budget but below 2004 levels. The downturn in this business began in Spring 2004, has now stabilised and the Division is expected to achieve its budget for the year. The new PatBase database subscription product has exceeded our expectations and will provide a stable and growing underpin for divisional revenues. RWS achieved record sales and operating profits for the period. Sales grew by 10% to £17.2m (2004: £15.6m) and profits before tax, goodwill and exceptional items advanced by 16% to £3.5m (2004: £3.0m). Cashflow from operating activities was £3.3m and net cash at 31 March 2005 was £9.7m after funding the acquisition of Eclipse Translations. Capital expenditure and working capital requirements during the period remained modest. Net assets of the Group at 31 March 2005 were £14.6m. As foreshadowed in the 2004 Annual Report, RWS has arranged hedging contracts for much of its Euro exposure for the whole of 2004/05, at a rate of 69.5. Whilst the much smaller US dollar exposure was unhedged, a significant proportion of the Group's dollar holdings were sold in March at 1.88. Earnings and Dividend Normalised earnings per share was 6.4p, on an increased number of shares in issue. The Directors have approved an interim dividend of 1.65p per share, an increase of 10% over the 2004 interim dividend of 1.5p per share. People As at 31 March 2005 the Group employed 339 people. We have been pleased to welcome 23 additional employees with the acquisition of Eclipse. We continue to seek good technical translators and linguists to meet our clients' requirements but acknowledge that identifying graduates from British universities with the requisite skills poses a challenge. Outlook Our financial position is strong as is our order book. The fundamental drivers for the growth of our core business show no signs of weakening and we are confident that our unique specialist skills and reputation will continue to attract existing and new clients. We remain confident of further good progress in the second half of the year. Andrew Brode Executive Chairman This interim announcement was approved by the Board of Directors on 7 June 2005. RWS Holdings plc Interim Report Unaudited Group Profit and Loss Account -------------------------------------------------------------------------------- Unaudited Unaudited 6 months ended 6 months ended 31 March 2005 31 March 2004 £'000 £'000 Note -------------------------------------------------------------------------------- Turnover 1 17,185 15,640 Cost of sales (10,170) (9,000) -------------------------------------------------------------------------------- Gross profit 7,015 6,640 Administrative expenses (3,739) (3,854) Amortization of goodwill (289) (271) Goodwill write-off - (1,916) Non-recurring costs associated with flotation - (58) ------------- ----------- Total administrative expenses (4,028) (6,099) ------------- ----------- -------------------------------------------------------------------------------- Group operating profit before goodwill 3,276 2,786 amortization and exceptional items -------------------------------------------------------------------------------- Group operating profit 2,987 541 Loss on sale of subsidiary undertakings - (126) -------------------------------------------------------------------------------- Profit on ordinary activities before interest 2,987 415 Net interest 219 191 -------------------------------------------------------------------------------- Profit on ordinary activities before taxation 3,206 606 Taxation 2 (1,076) 543 -------------------------------------------------------------------------------- Net profit for the financial period (Profit attributable to shareholders) 2,130 1,149 Dividends 3 (647) (567) -------------------------------------------------------------------------------- Profit retained for the financial period 1,483 582 -------------------------------------------------------------------------------- Pence Pence (restated) Earnings per share 4 Basic 5.6 3.9 Diluted 5.2 3.7 Normalised earnings per share 4 Basic 6.4 6.5 Diluted 5.9 6.3 RWS Holdings plc Interim Report Unaudited Group Statement of Total Recognised Gains and Losses and Reconciliation of movements in Shareholders' Funds -------------------------------------------------------------------------------- Unaudited Unaudited 6 months ended 6 months ended 31 March 2005 31 March 2004 £'000 £'000 -------------------------------------------------------------------------------- Profit attributable to shareholders 2,130 1,149 Exchange adjustments on retranslation of net assets of subsidiary undertakings 12 27 -------------------------------------------------------------------------------- Total recognised gains and losses 2,142 1,176 Dividends (647) (567) Shares issued under options exercised 487 - Shares held by existing HMG shareholders - 6,513 Shares issued to Bybrook shareholders - 1,866 Share options issued - 2,030 Adjustments arising on reverse acquisition - (9,888) -------------------------------------------------------------------------------- Total movements in the period 1,982 1,130 Shareholders' funds at beginning of the period 12,599 10,962 -------------------------------------------------------------------------------- Shareholders' funds at end of the period 14,581 12,092 -------------------------------------------------------------------------------- RWS Holdings plc Interim Report Unaudited Group Balance Sheet -------------------------------------------------------------------------------- Note Unaudited Unaudited 31 March 2005 31 March 2004 £'000 £'000 -------------------------------------------------------------------------------- Fixed assets Intangible assets 7,376 5,722 Tangible assets 974 587 -------------------------------------------------------------------------------- 8,350 6,309 -------------------------------------------------------------------------------- Current assets Work in progress 742 619 Debtors: due within one year 6,423 4,681 Cash at bank 9,958 10,420 ----------- ----------- 17,123 15,720 Creditors: amounts due within one year 5 (10,855) (5,375) -------------------------------------------------------------------------------- Net current assets 6,268 10,345 -------------------------------------------------------------------------------- Total assets less current liabilities 14,618 16,654 Provision for liabilities and charges (27) (4,562) -------------------------------------------------------------------------------- Net assets 14,591 12,092 -------------------------------------------------------------------------------- Capital and reserves Called up share capital 6 1,914 7,642 Share premium account 1,199 737 Capital reserve 68 - Share option reserve 1,962 2,030 Reserve acquisition reserve (8,483) (8,483) Profit and loss account 17,921 10,166 -------------------------------------------------------------------------------- Shareholders' funds - equity interests 14,581 12,092 Non-equity minority interests 10 - -------------------------------------------------------------------------------- Shareholders' funds and minority interests 14,591 12,092 -------------------------------------------------------------------------------- RWS Holdings plc Interim Report Unaudited Group Cash Flow Statement -------------------------------------------------------------------------------- Note Unaudited Unaudited 6 months ended 6 months ended 31 March 2005 31 March 2004 £'000 £'000 -------------------------------------------------------------------------------- Net cash inflow from operating activities 3,342 2,944 Returns on investments and servicing of finance Interest received 212 405 Interest paid (3) (70) -------------------------------------------------------------------------------- 209 335 -------------------------------------------------------------------------------- Taxation (975) (467) Capital expenditure and financial investment Purchase of tangible fixed assets (91) (64) Redemption of loan notes - 17,500 -------------------------------------------------------------------------------- (91) 17,436 -------------------------------------------------------------------------------- Acquisitions and disposals Acquisition of subsidiary 7 (2,430) - Net overdraft in undertakings acquired (249) - Overdraft in undertakings disposed - 62 Acquisition related expenses and other payments to third parties on the reverse acquisition - (1,396) -------------------------------------------------------------------------------- (2,679) (1,334) -------------------------------------------------------------------------------- Equity dividends paid to shareholders (1,338) - Equity dividends paid to shareholders of Bybrook Limited - (10,000) -------------------------------------------------------------------------------- Cash (outflow)/inflow before financing (1,532) 8,914 Financing Issue of ordinary shares 487 - -------------------------------------------------------------------------------- (Decrease)/increase in cash (1,045) 8,914 -------------------------------------------------------------------------------- RWS Holdings plc Interim Report Notes to the Unaudited Group Cash Flow Statement -------------------------------------------------------------------------------- Unaudited Unaudited 6 months ended 6 months ended 31 March 2005 31 March 2004 £'000 £'000 -------------------------------------------------------------------------------- Reconciliation of operating profit to net cash flow from operating activities Group operating profit 2,987 541 Depreciation and amortization 449 2,322 Work in progress (increase)/decrease (60) 378 Debtors increase (683) (60) Creditors increase / (decrease) 649 (264) Other non-cash movements - 27 -------------------------------------------------------------------------------- Net cash flow from operating activities 3,342 2,944 -------------------------------------------------------------------------------- Reconciliation of net cash flow to movement in net funds Increase in cash in the period (1,045) 8,914 Net funds at beginning of the period 10,738 1,211 -------------------------------------------------------------------------------- Net funds at end of the period 9,693 10,125 -------------------------------------------------------------------------------- Analysis of net funds At 1 October Cash At 31 March 2004 flow 2005 £'000 £'000 £'000 Cash 11,107 (1,149) 9,958 Overdrafts (369) 104 (265) -------------------------------------------------------------------------------- 10,738 (1,045) 9,693 -------------------------------------------------------------------------------- RWS Holdings plc Interim Report Notes -------------------------------------------------------------------------------- Unaudited Unaudited 6 months ended 6 months ended 31 March 2005 31 March 2004 £'000 £'000 -------------------------------------------------------------------------------- 1 Turnover and segmental information Turnover and operating profit derive from continuing operations Turnover by class of business Translation and localization services 15,886 14,183 Information services 1,299 1,475 ----------- ----------- 17,185 15,640 ----------- ----------- Turnover by geographic location of Group undertakings United Kingdom 15,050 13,969 Continental Europe 301 233 Japan 1,701 1,332 United States of America 133 106 ----------- ----------- 17,185 15,640 ----------- ----------- Turnover by geographic market in which customers are located United Kingdom 2,212 2,494 Continental Europe Germany 5,908 5,407 France 1,956 1,537 Other 3,308 3,593 ----------- ----------- 11,172 10,537 Japan 1,287 763 United States of America 2,456 1,738 Other 58 108 ----------- ----------- 17,185 15,640 ----------- ----------- The value of total assets and net operating assets located outside of the UK is not material. In the opinion of the Directors, analysis of profit by business sector and location of Group undertakings would be seriously prejudicial to the interests of the Group. -------------------------------------------------------------------------------- RWS Holdings plc Interim Report Notes (continued) -------------------------------------------------------------------------------- 2 Taxation - the charge for the 6 months ended 31 March 2005 is at the rate that is anticipated will be applicable for the whole year. The charge for the half year to 31 March 2004 included a tax credit of £1,400,000 which related to certain overseas trading losses in prior years within the Bybrook group that were available for group relief but had not been allowed for in deriving the tax charge in prior periods. The quantum was agreed subsequent to 31 March 2004. The Group has estimated capital losses of £20 million available for offset against the capital gain arising on the redemption of loan notes in the 6 months ended 31 March 2004. As the quantum of the capital losses has not been agreed the offset of the capital losses has not been recognised in the current tax charge. -------------------------------------------------------------------------------- 3 Dividends - the interim dividend of 1.65p (31 March 2004 - 1.5p) per Ordinary share will be paid on 30 June 2005 to Shareholders on the Register on 17 June 2005. -------------------------------------------------------------------------------- 4 Earnings per Ordinary share Unaudited 6 Unaudited 6 months ended months ended 31 March 2005 31 March 2004 ---------------------- ----------------------- Earnings EPS Earnings EPS £'000 Pence £'000 Pence (restated) ---------------------- ----------------------- Basic earnings 2,130 5.6 1,149 3.9 Goodwill amortization and write-off 289 0.8 2,187 7.4 ---------------------- ----------------------- 2,419 6.4 3,336 11.3 Exceptional tax credit from prior year trading losses - - (1,400) (4.8) ---------------------- ----------------------- Normalised earnings 2,419 6.4 1,936 6.5 ---------------------- ----------------------- No significant tax effect arises from the adjustment for goodwill. Number of shares Number of shares (restated) Diluted earnings per share are based on the group profit for the period and a weighted average of Ordinary shares in issue during the period calculated as follows: In issue 38,093,574 29,374,891 Dilutive potential Ordinary shares arising from unexercised share options 2,697,289 1,484,278 ------------ ------------ 40,790,863 30,859,169 ------------ ------------ The weighted average number of Ordinary shares in issue reflects the 493,385 Ordinary shares issued under options exercised during the period. At 31 March 2005 there were unexercised options over a total of 4,040,472 Ordinary shares. The weighted average number of shares in issue for the period to 31 March 2004 has been restated as the calculation of the weighted average has been changed from a monthly to a daily basis. RWS Holdings plc Interim Report Notes (continued) -------------------------------------------------------------------------------- 5 Creditors: amounts due within one year include corporation tax of £5,474,000 (31 March 2004 - £1,165,000). The taxation amount includes £4,434,000 being the liability on the gain arising on the redemption of loan notes in the 6 months ended 31 March 2004. -------------------------------------------------------------------------------- 6 Share capital was reduced by cancelling the Deferred shares for no consideration in September 2004. -------------------------------------------------------------------------------- 7 On 1 February 2005, the Group acquired Eclipse Translations Limited for a consideration of £2,250,000 paid in cash. In calculating the goodwill arising on acquisition, the provisional fair value of net assets acquired has been assessed and adjustments to book value made where necessary. These adjustments are summarised in the following table: Book value Provisional Fair value fair value to the £'000 adjustments Group £'000 £'000 ---------------------------------------- Fixed assets 524 (65) 459 Current assets 281 - 281 Creditors due within one year (524) (300) (824) ---------------------------------------- Net liabilities acquired 281 (365) (84) ---------------------------------------- Cash consideration (including acquisition expenses of £180,000) 2,430 Less: amount recoverable from the vendors in respect of taxation liabilities (300) --------- 2,130 Net liabilities acquired 84 --------- Goodwill 2,214 --------- Net overdraft included in undertakings acquired 249 --------- The effects of the acquisition on results for the Group for the half year to 31 March 2005, are not material and are therefore not shown separately on the Goup Profit and Loss Account and Group Cash Flow Statement. On 7 October 2003, Bybrook Limited sold the entire share capital of subsidiaries with operations based in California to its shareholders for a consideration of £500. The loss on disposal amounted to £126,000 and the overdraft included in the undertakings disposed was £62,000. -------------------------------------------------------------------------------- 8 The interim results for the half years ended 31 March 2005 and 31 March 2004 are unaudited and unreviewed by our auditors. The accounts in this Interim Report do not constitute statutory accounts in accordance with Section 240 of the Companies Act 1985. The financial information contained in this document has been prepared on the basis of accounting policies consistent with those set out in the Group's statutory accounts for the year ended 30 September 2004, which received an unqualified report and have been lodged with the Registrar of Companies. -------------------------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock Exchange

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