New horizons
RWS Holdings plc 2015 Annual Report
Contents Contents Contents
New horizons
RWS Holdings plc 2015 Annual Report
Chairman’s Statement
Strategic Review
Board of Directors
Directors’ Report
Statement of Directors’ Responsibilities
Directors’ Remuneration Report
Independent Auditor’s Report
to the Members of RWS Holdings plc
2
4
8
9
12
13
16
Financial Statements
Consolidated Statement of Comprehensive Income 19
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Company Balance Sheet
Notes to the Company Financial Statements
Shareholder information
20
21
22
23
49
50
56
RWS Holdings plc 2015 Annual Report ⁄ 1
New horizons 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
£95.2 million (2014: £93.6 million). In constant currency
terms, sales were up by 5%. Adjusted operating profit
before amortization of intangibles and share option costs
was up 4% to £22.9 million (2014: £22.0 million).
Adjusted profit before tax, amortization of intangibles
and share option costs increased by 3% to £22.7 million
(2014: £22.1 million). 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 £20.7 million (2014:
£19.6 million), 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
£85.7 million (2014: £78.4 million), of which net cash
represented £30.6 million (2014: £22.5 million). The
positive movement in net cash is despite significant
outlays in respect of corporation tax of £5.1 million and
the final dividend for 2014 and the interim dividend for
2015 which totalled £9.8 million.
Currency Effects and Hedging
Reported revenues were adversely affected by
£2.9 million 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.
2 ⁄ RWS Holdings plc 2015 Annual Report
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.
New horizons Chairman’s Statement (continued)
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
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.
Post Year End Acquisition
Queen’s Award
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$70 million. 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.
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
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.
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.
The acquisition of CTi is expected to be immediately and
significantly earnings enhancing, with the US$70 million
consideration based upon CTi reporting not less than
US$7 million EBITDA for the year ended 31 December
2015. In the previous year, adjusted EBITDA was
US$4.8 million.
Funding for the acquisition was via a combination of
a US$45 million 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.
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
7 December 2015
RWS Holdings plc 2015 Annual Report ⁄ 3
New horizons Strategic Review
Business Model
Our Strategy
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’.
4 ⁄ RWS Holdings plc 2015 Annual Report
RWS’ 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.
New horizons Strategic Review (continued)
Annual Revenue £m
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Operating Review
Patent Translations
The Group’s core patent translations business represents
approximately 55% of Group sales and grew underlying
revenues by 2% to £52.9 million, or 7% in constant
currency terms (2014: £52.0 million). This performance
reflects earlier client wins, organic growth from the
established client base, an increase in patent applications
following the 2011 American 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.
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 £20.4 million (2014: £19.4 million) a rise of 5%,
and generated patent translation transfer revenues of
£4.6 million (2014: £4.3 million).
We have now completed the integration initiatives we
outlined in our half year results announcement which
included integrating inovia and RWS’ 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’ 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.
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
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.
RWS Holdings plc 2015 Annual Report ⁄ 5
New horizons
Strategic Review (continued)
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
£15.9 million (2014: £16.0 million) 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 £6.0 million 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: £6.2 million) 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
6 ⁄ RWS Holdings plc 2015 Annual Report
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 2.5million in 2014.
Risk Management
The Group maintains 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.
New horizons Strategic Review (continued)
. 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.
On behalf of the Board
Richard Thompson
7 December 2015
RWS Holdings plc 2015 Annual Report ⁄ 7
New horizons Board of Directors at 30 September 2015
Andrew S Brode (75)
Chairman
Peter Mountford (58)
Non-Executive Director
Member of the Audit Committee and the Remuneration
Committee
Chairman of the Audit Committee and member of the
Remuneration Committee
Appointed as a Director 11 April 2000
Appointed as a Director 11 April 2000
Founder of Bybrook and led the management buy in
of the RWS Group. A substantial shareholder in the
Company
Chairman of Mountford Capital Limited, Chairman of
Heropreneurs and a Non-Executive director of a number
of other private companies
Non-Executive Chairman of Learning Technologies Group
plc and Electric Word plc and Non-Executive Director of
Vitesse Media plc
Elisabeth A Lucas (59)
Non-Executive Director
Non-Executive Director of a number of private companies
Member of the Audit Committee and the Remuneration
Committee
Joined RWS Group in 1977, Managing Director of
Translations Division from 1992 and Chief Executive
Officer from 1995 to 2011
Appointed as a Director on 11 November 2003
Registered office
Europa House
Chiltern Park
Chiltern Hill
Chalfont St Peter
Buckinghamshire
SL9 9FG
Company registration number
3002645
Reinhard Ottway (56)
Chief Executive Officer
Appointed as a Director 1 January 2012
Joined RWS Group in 1994 and was Business
Development Director from 2001
Richard Thompson (53)
Finance Director and Company Secretary
Appointed as a Director and Company Secretary
28 November 2012
Previously worked for Actix International Limited,
a global supplier of software and services to the
telecommunications market
David E Shrimpton (72)
Senior independent Non-Executive Director
and Deputy Chairman
Member of the Audit Committee and Chairman of the
Remuneration Committee
Appointed as a Director 1 January 2010
Non-Executive Director of a number of private companies
8 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Directors’ Report
The Directors present their annual report together with
the audited consolidated financial statements for the year
ended 30 September 2015.
Business performance and risks
The review of the business, operations, principal risks and
outlook are dealt with in the Strategic review on pages
4 to 7. The key performance indicators of the Group are
revenues and adjusted pre-tax profit before amortization
of acquired intangibles and share option costs.
Going concern accounting basis
The Group had cash resources of £30.6 million at
30 September 2015 and generated free cash flow
of £18.0 million. The Directors have considered the
recent operating results, the acquisition of CTi and the
associated debt along with the financial position and
have a reasonable expectation that the Group has
adequate resources to continue in operation for the
foreseeable future. For this reason, the Directors continue
to adopt the going concern basis.
Financial results
Financial instruments
The financial statements set out the results of the Group
for the year ended 30 September 2015 which are
shown on page 19. Group revenues advanced by
1.7% to £95.2 million (2014: £93.6 million) and pre-
tax profit before amortization of intangibles and share
option costs was £22.7 million (2014: £22.1 million),
a rise of 2.7%. Profit before tax is £20.7 million (2014:
£19.6 million). The total tax expense was £5.1 million
(2014: £4.4 million) an effective tax rate of 24.8% (2014:
22.6%).
Basic earnings per share was 7.3 pence (2014: 7.2
pence as restated following the subdivision of Group
shares).
Dividends
The Directors recommend a final dividend of 3.85
pence per Ordinary share (see note 8) to be paid on
the 26 February 2016 to shareholders on the register at
29 January 2016, which, together with the dividend of
1.03 pence paid in July 2015, makes a total dividend for
the year of 4.88 pence (2014: 4.58 pence as restated).
The final dividend will be reflected in the financial
statements for the year ending 30 September 2016.
The proposed total dividend per share is 1.5 times
covered by basic earnings per share.
Information about the use of financial instruments by the
Group is given in note 17 to the financial statements.
Events after 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. Further details are provided
in note 24.
Directors
Details of members of the Board at 30 September 2015
are set out on page 8.
The interests of the Directors in shares during the year are
set out on page 14 in the Directors’ Remuneration Report.
Liz Lucas, Richard Thompson and David Shrimpton retire
by rotation at the Annual General Meeting and being
eligible offer themselves for re-election.
The Company’s Annual General Meeting will be held in
London on 9 February 2016.
Directors’ indemnities
As permitted in its articles of association, the Directors
have the benefit of an indemnity which is a third party
indemnity provision as defined in section 234 of the
Companies Act 2006. The indemnity was in force
throughout the last financial year and is currently in
force. (The Company also purchased and maintained
throughout the financial year, Directors and Officers
liability insurance in respect of itself and its Directors).
RWS Holdings plc 2015 Annual Report ⁄ 9
New horizons Directors’ Report (continued)
Corporate governance
The Board
Throughout the year the Board comprised three Executive
and three Non-Executive Directors. The Board considers
that all of the Non-Executive Directors are independent
in character and judgement and that there are no
relationships or circumstances which are likely to affect
their independent judgement.
The Executive Directors have direct responsibility for
business operations whilst the Non-Executive Directors
have a responsibility to bring independent, objective
judgement to bear on Board decisions. The Board
met six times during the year to review financial
performance and approve key business decisions, so that
it retained control over strategic, budgetary, financial
and organisational issues and monitored executive
management. In addition to the Executive Directors, the
members of the Senior Executive Team are: Charles Sitch,
Managing Director UK Translations Division; Neil Simpkin,
Deputy Managing Director UK Translations Division; Jo
Hindley, Commercial Director UK Translations Division;
Caroline Chenique, European Sales Director and Roberto
Aletto, IT Director. They are invited to attend various
board meetings and report on the areas of responsibility
delegated to them.
Audit Committee
The members of the Audit Committee are Peter Mountford
(committee Chairman), David Shrimpton, Elisabeth Lucas
and Andrew Brode.
The members with the exception of Andrew Brode, are
Non-Executive Directors and the Board is satisfied that
they have recent and relevant financial experience.
Andrew Brode is the Group’s Chairman and a substantial
shareholder in the Ordinary shares of the Company. The
Finance Director and representatives from the external
auditors attend meetings at the request of the Committee.
During the year the Committee met twice.
The Committee reviews and makes recommendations
to the Board on: any change in accounting policies;
decisions requiring a major element of judgement and
risk; compliance with accounting standards and legal
and regulatory requirements; disclosures in the interim
and annual report and accounts; dividend policy and
payment; any significant concerns of the external auditor
about the conduct, results or overall outcome of the
annual audit of the Group; and, any matters that may
significantly affect the independence of the external
auditor.
10 ⁄ RWS Holdings plc 2015 Annual Report
In addition the Committee has oversight of the external
audit process and reviews its effectiveness and approves
any non-audit services provided.
Remuneration Committee
Further information about the Committee and the
Company’s remuneration policy is set out on page 13
in the Directors’ Remuneration Report.
Internal controls and risk management
The Board has overall responsibility for the Group’s system
of internal controls. The system is designed to manage
rather than eliminate the risk of failure to achieve business
objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.
The Directors believe that the Group has internal control
systems in place appropriate to the size and nature of the
business. The key elements are: bi-monthly Group Board
meetings with reports from and discussions with senior
executives on performance and key risk areas in the
business; monthly financial reporting, for the Group and
for each subsidiary, of actual performance compared
to budget and previous year; annual budget setting;
and, a defined organisational structure with appropriate
delegation of authority. The Board also receives a report
from the external auditor on matters identified in the
course of the statutory audit work.
In addition, a further Board Meeting is held during the
year to consider and assess the risks facing the business
and approve the steps and timetable senior management
have established to mitigate those risks.
Employment of disabled persons
It is Company policy that people with disabilities should
have the same consideration as others with respect to
recruitment, retention and personal development. People
with disabilities, depending on their skills and abilities,
enjoy the same career prospects as other employees and
the same scope for realising potential.
Employee involvement
The Company’s policy is to consult and discuss with
employees at staff meetings matters likely to affect
employee interests. The Company is committed to
a policy of recruitment and promotion on the basis
of aptitude and ability irrespective of sex, race or
religion. Group subsidiaries endeavour to provide equal
opportunities in recruiting, training, promoting and
developing the careers of all employees.
New horizons Directors’ Report (continued)
Substantial shareholdings
At 30 September 2015, excluding the Directors, the
following were substantial shareholders:
£211,579 (representing in accordance with institutional
investor guidelines, approximately 10% of the share
capital in issue as at 7 December 2015) as if the pre-
emption rights of section 561 of the Act did not apply.
Liontrust Asset Management
Octopus Investments
Investec Wealth and Investment
Hargreave Hale
Blackrock Investment Management
% holding
12.5
6.6
4.8
3.1
2.1
The Directors have no immediate plans to make use of
these authorities except in respect of the issue of shares
under the employee share option scheme. In addition,
and in line with best practice, the Company has not
issued more than 7.5% of its issued share capital on a
non-pro rata basis over the last four years.
Authority to allot
Rule 9 of the city code
Under rule 9 of the city code, where any person acquires
an interest in shares which carry 30 per cent or more of
the voting rights, that person is normally required to make
a general offer to all the remaining shareholders of the
Company to acquire their shares. An ordinary resolution
was approved at the 11 February 2014 Annual General
Meeting which approved, for the period ending on
10 May 2017 or, if earlier, the date of the 2017 Annual
General Meeting, the waiver by the Panel on Takeovers
and Mergers of any requirement under rule 9 for Andrew
Brode (Chairman) and related parties to make a general
offer to the shareholders of the Company as a result of
any market purchase by the Company of its own shares.
Independent Auditors
All of the Directors have taken all the steps that they
ought to have taken to make themselves aware of any
information relevant to the audit and established that the
auditors are aware of that information. As far as each of
the Directors is aware, the auditors have been provided
with all relevant information.
Pricewaterhouse Coopers LLP (PwC) have expressed
their willingness to continue in office and a resolution to
reappoint them will be proposed at the 9 February 2016
Annual General Meeting.
Under section 549 Companies Act 2006, the Directors
are prevented, subject to certain exceptions, from
allotting shares in the Company or from granting rights
to subscribe for or to convert any security into shares in
the Company without the authority of the shareholders
in General meeting. An ordinary resolution will be
proposed at the 9 February 2016 Annual General
Meeting which renews, for the period ending 10 May
2017, or if earlier the date of the 2017 Annual General
Meeting, the authority previously granted to the Directors
to allot shares, and to grant rights to subscribe for or
convert any security into shares in the Company, up to
an aggregate nominal value of £705,266, representing
approximately one third of the share capital of the
Company in issue at 7 December 2015.
The Directors have no immediate plans to make use of
this authority except in respect of the issue of shares
under the employee share option scheme. As at the date
of this report the Company does not hold any Ordinary
shares in the capital of the Company in treasury.
Statutory Pre-emption Rights
Under section 561 of the Companies Act 2006, when
new shares are allotted, they must first be offered to
existing shareholders pro rata to their holdings. A special
resolution will be proposed at the 9 February 2016
Annual General Meeting which renews, for the period
ending on 10 May 2017 or, if earlier, the date of the
2017 Annual General Meeting, the authorities previously
granted to the Directors to:
(a) allot shares of the Company in connection with a
rights issue or other pre-emptive offer; and
(b) otherwise allot shares of the Company, or sell treasury
shares for cash, up to an aggregate nominal value of
RWS Holdings plc 2015 Annual Report ⁄ 11
New horizons
Website publication
The Directors are responsible for ensuring the annual
report and the financial statements are made available
on a website. Financial statements are published on
the Company’s website in accordance with legislation
in the United Kingdom governing the preparation
and dissemination of financial statements, which
may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company’s website
is the responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity of the
financial statements contained therein.
On behalf of the Board
Richard Thompson
Finance Director and Company Secretary
7 December 2015
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the annual
report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have elected to prepare the Group financial
statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European
Union and the Company financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law the
Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view
of the state of affairs of the Group and the Company
and of the profit or loss of the Group for that period.
The Directors are also required to prepare financial
statements in accordance with the rules of the London
Stock Exchange for companies trading securities on the
Alternative Investment Market.
In preparing these financial statements, the Directors are
required to:
. select suitable accounting policies and then apply them
consistently;
. make judgements and accounting estimates that are
reasonable and prudent;
. state whether the Group financial statements have been
prepared in accordance with IFRSs as adopted by the
European Union and the Company financial statements
have been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice, subject to
any material departures disclosed and explained in the
financial statements;
. prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and enable them to ensure that the
financial statements comply with the requirements of
the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
12 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Directors’ Remuneration Report
Remuneration Committee
Share Options
The members of the Remuneration Committee are David
Shrimpton (committee Chairman), Peter Mountford,
Elisabeth Lucas and Andrew Brode.
With the exception of Andrew Brode the members are
Non-Executive Directors.
On 3 April 2013 the Board approved a share option
scheme. The scheme was designed to incentivise
Executive Directors and Executives and further align
the interests of senior employees and shareholders. The
Committee has responsibility for supervising the scheme
and the grant of options under its terms.
The remit of the Committee is primarily to determine and
agree with the Board the framework or broad policy for
the remuneration of the Company’s Executive Directors
and, if required by the Board, the Senior Executives of
the Group. The remuneration of Non-Executive Directors
is a matter for the Board, excluding the Non-Executive
Directors. No Director or Senior Executive is involved
in any discussion or decision about his or her own
remuneration.
The Remuneration Committee met twice during the year.
The Board has confirmed that the Group’s overall
remuneration policy is designed to attract and retain
the right people and provide appropriate incentives to
encourage enhanced performance so as to create growth
in shareholder value.
Individual elements of remuneration
For Executive Directors and Senior Executives the
components contained in the total remuneration
package are: base salary; performance related annual
bonus, share options and other customary benefits
such as; holidays and health benefits, sickness benefit
and pension contributions. Neither the performance
related annual bonus nor the share options apply to the
Chairman.
Performance related bonuses are based on a
combination of sales and/or adjusted profit before
tax targets depending on an individual’s area of
responsibility.
For Non-Executive Directors there is only one component,
a base fee.
Service contracts
The Non-Executive Directors do not have service
contracts. Their appointments will continue unless and
until terminated by either party giving not less than
30 days’ notice.
The service contracts of Executive Directors continue
unless and until terminated by either party giving at least
six months’ notice.
The date of the Chairman’s service contract is 30 October
2003 and the service contracts of Reinhard Ottway and
Richard Thompson are dated 20 December 2011 and
1 November 2012 respectively. In the event of early
termination, the Executive Directors’ service contracts
provide for compensation up to a maximum of the total
benefits which he or she would have received during the
notice period.
Directors’ emoluments and pension contributions
The aggregate remuneration, excluding pension
contributions, paid or accrued for the Directors of the
Company for service in all capacities during the year
ended 30 September 2015 was £998,000 (2014:
£952,000). The remuneration of individual directors
and the pension contributions paid by the Group to
their personal pension schemes during the year were as
follows:
RWS Holdings plc 2015 Annual Report ⁄ 13
New horizons Directors’ Remuneration Report (continued)
Salary
or fees
£’000
263
321
235
45
35
35
934
Bonus
£’000
–
28
35
–
–
–
63
Taxable
benefits
£’000
–
1
–
–
–
–
1
2015
Total
£’000
263
350
270
45
35
35
998
2015
Pension
contributions
£’000
–
10
7
–
–
–
17
2014
Total
£’000
250
339
248
45
35
35
952
2014
Pension
contributions
£’000
15
9
7
–
–
–
31
Andrew Brode
Reinhard Ottway
Richard Thompson
Elisabeth Lucas
Peter Mountford
David Shrimpton
Directors’ interests in shares
The interests of the Directors as at 30 September 2015 (including the interests of their families and related
trusts), all of which were beneficial, in the Ordinary shares were:
Andrew Brode
Elisabeth Lucas
Reinhard Ottway
Peter Mountford
Richard Thompson
Ordinary shares of 1 pence
90,174,060
50,000
4,053
68,775
13,000
90,309,888
The interests of Directors at the year end in options to subscribe for Ordinary shares of the Company,
together with details of any options granted during the year are included in the following table. All options
were granted at market value at the date of grant.
Approved Share Option scheme
Number of shares under option
At
1 October
2014
(restated)
23,215
23,215
Issued
in the year
Exercised
in the year
At
30 September
2015
First date
exercisable
Last date
exercisable
Exercise price
Pence
(restated)
–
–
–
–
23,215
23,215
129.20
129.20
03⁄04⁄16
03⁄04⁄16
03⁄04⁄21
03⁄04⁄21
Reinhard Ottway
Richard Thompson
Unapproved Share Option scheme
Number of shares under option
At
1 October
2014
(restated)
2,515,745
1,246,265
Issued
in the year
Exercised
in the year
At
30 September
2015
First date
exercisable
Last date
exercisable
Exercise price
Pence
(restated)
–
–
–
–
2,515,745
1,246,265
129.20
129.20
03⁄04⁄15
03⁄04⁄15
03⁄04⁄21
03⁄04⁄21
Reinhard Ottway
Richard Thompson
14 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Directors’ Remuneration Report (continued)
The options granted under both schemes will be
exercisable at the mid market price of 129.2p.
The market price of the Company’s share as at 30th
September 2015 and the highest and lowest market
prices during the year are as follows:
30 September 2015
Highest Market Price
Lowest Market Price
140p
185p
118p
All participants in the share option scheme have
indemnified the Company against any tax liability
relating to the option including class 1 employers
national insurance contribution.
Transactions with directors
During the year there were no material transactions
between the Company and the Directors, other than their
emoluments.
On behalf of the Board
Richard Thompson
7 December 2015
RWS Holdings plc 2015 Annual Report ⁄ 15
New horizons Independent Auditor’s Report to the Members of RWS Holdings plc
In applying the financial reporting framework, the
Directors have made a number of subjective judgements,
for example in respect of significant accounting
estimates. In making such estimates, they have made
assumptions and considered future events.
Opinion on other matter prescribed
by the Companies Act 2006
In our opinion, the information given in the Strategic
Report and the Directors’ Report for the financial year for
which the financial statements are prepared is consistent
with the financial statements.
Other matters on which we are required to report by
exception
Adequacy of accounting records and information
and explanations received
Under the Companies Act 2006 we are required to
report to you if, in our opinion:
. we have not received all the information and
explanations we require for our audit; or
. adequate accounting records have not been kept by
the Parent Company, or returns adequate for our audit
have not been received from branches not visited by
us; or
. the Parent Company financial statements are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this
responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are required to
report to you if, in our opinion, certain disclosures of
directors’ remuneration specified by law are not made.
We have no exceptions to report arising from this
responsibility.
Report on the financial statements
Our opinion
In our opinion:
. RWS Holdings plc’s Group financial statements and
Parent Company financial statements (the “financial
statements”) give a true and fair view of the state of
the Group’s and of the Parent Company’s affairs as at
30 September 2015 and of the Group’s profit and cash
flows for the year then ended;
. the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards (“IFRSs”) as adopted by the
European Union;
. the Parent Company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
. the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
What we have audited
The financial statements, included within the Annual
Report, comprise:
. the Consolidated Statement of Financial Position as at
30 September 2015;
. the Company Balance Sheet as at 30 September 2015;
. the Consolidated Statement of Comprehensive Income
for the year then ended;
. the Consolidated Statement of Cash Flows for the year
then ended;
. the Consolidated Statement of Changes in Equity for
the year then ended; and
. the notes to the financial statements, which include a
summary of significant accounting policies and other
explanatory information
Certain required disclosures have been presented
elsewhere in the Annual Report, rather than in the notes to
the financial statements. These are cross-referenced from
the financial statements and are identified as audited.
The financial reporting framework that has been applied
in the preparation of the Group financial statements is
applicable law and IFRSs as adopted by the European
Union. The financial reporting framework that has been
applied in the preparation of the Parent Company
financial statements is applicable law and
United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice).
16 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Independent Auditor’s Report to the Members of RWS Holdings plc (continued)
We test and examine information, using sampling and
other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw
conclusions. We obtain audit evidence through testing
the effectiveness of controls, substantive procedures
or a combination of both. In addition, we read all
the financial and non-financial information in the
Annual Report to identify material inconsistencies with
the audited financial statements and to identify any
information that is apparently materially incorrect based
on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the
audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
Nigel Reynolds (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
7 December 2015
Responsibilities for the financial statements
and the audit
Our responsibilities and those of the Directors
As explained more fully in the Statement of Directors’
Responsibilities set out on page 12, the Directors are
responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with
applicable law and International Standards on Auditing
(UK and Ireland) (“ISAs (UK & Ireland”). Those standards
require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
This report, including the opinions, has been prepared
for and only for the Parent Company’s members as a
body in accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands
it may come save where expressly agreed by our prior
consent in writing.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK
& Ireland). An audit involves obtaining evidence about
the amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether
caused by fraud or error. This includes an assessment of:
. whether the accounting policies are appropriate to the
Group’s and the Company’s circumstances and have
been consistently applied and adequately disclosed;
. the reasonableness of significant accounting estimates
made by the Directors; and
. the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing
the Directors’ judgements against available evidence,
forming our own judgements, and evaluating
the disclosures in the financial statements.
RWS Holdings plc 2015 Annual Report ⁄ 17
New horizons Financial Statements
Financial Statements
Consolidated Statement of Comprehensive Income for the year ended 30 September
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Analysed as:
Operating profit before charging:
Amortization of customer relationships, trademarks and technology
Share based payment costs
Operating profit
Finance income
Finance costs
Profit before tax
Taxation expense
Profit for the year
Other comprehensive income*
Gain/(loss) on retranslation of foreign operations
Total other comprehensive income/(expense)
Total comprehensive income attributable to:
Owners of the parent
Basic earnings per Ordinary share (pence per share)
Diluted earnings per Ordinary share (pence per share)
Note
3
4
11
19
6
6
7
9
9
2015
£’000
95,215
(57,706)
37,509
(16,677)
20,832
22,894
(1,607)
(455)
20,832
71
(251)
20,652
(5,124)
15,528
1,069
1,069
2014
£’000
93,556
(56,783)
36,773
(17,187)
19,586
22,036
(1,572)
(878)
19,586
57
(14)
19,629
(4,430)
15,199
(618)
(618)
16,597
14,581
7.3
7.3
7.2
7.1
*Other comprehensive income includes only items that will be subsequently reclassified to Profit before tax
when specific conditions are met.
The notes on pages 23 to 46 form part of these financial statements.
RWS Holdings plc 2015 Annual Report ⁄ 19
New horizons Consolidated Statement of Financial Position at 30 September
Registered Company 3002645
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax assets
Current assets
Trade and other receivables
Foreign exchange derivatives
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Income tax payable
Provisions
Non-current liabilities
Other payables
Provisions
Deferred tax liabilities
Total liabilities
Total net assets
Equity
Capital and reserves attributable to owners of the parent
Share capital
Share premium
Share based payment reserve
Reverse acquisition reserve
Foreign currency reserve
Retained earnings
Total equity
Note
2015
£’000
2014
£’000
10
11
12
13
14
17
20
3
15
16
15
16
13
3
18
31,445
6,836
17,732
340
56,353
17,907
309
30,569
48,785
105,138
14,797
2,417
77
17,291
30
301
1,826
2,157
19,448
85,690
2,116
3,583
1,801
(8,483)
1,638
85,035
85,690
30,512
8,228
17,310
353
56,403
16,385
554
22,479
39,418
95,821
12,277
2,198
480
14,955
30
378
2,024
2,432
17,387
78,434
2,116
3,583
1,346
(8,483)
569
79,303
78,434
The notes on pages 23 to 46 form part of these financial statements.
The financial statements on pages 19 to 46 were approved by the Board of Directors and authorised for issue on
7 December 2015 and were signed on its behalf by:
Andrew Brode
Director
20 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Consolidated Statement of Changes in Equity for the year ended 30 September
Share
capital
£’000
2,116
–
–
–
–
–
2,116
–
–
–
–
–
2,116
Share
premium
account
£’000
Other
reserves
(see below)
£’000
Retained
earnings
£’000
3,583
(6,828)
72,842
–
–
–
–
–
3,583
–
–
–
–
–
3,583
Share
based payment
reserve
£’000
468
–
878
1,346
–
455
1,801
–
(618)
(618)
–
878
(6,568)
–
1,069
1,069
–
455
(5,044)
Reverse
acquisition
reserve
£’000
(8,483)
–
–
(8,483)
–
–
(8,483)
15,199
–
15,199
(8,738)
–
79,303
15,528
–
15,528
(9,796)
–
85,035
Foreign
currency
reserve
£’000
1,187
(618)
–
569
1,069
–
1,638
Total equity
attributable
to owners
of the parent
£’000
71,713
15,199
(618)
14,581
(8,738)
878
78,434
15,528
1,069
16,597
(9,796)
455
85,690
Total
other
reserves
£’000
(6,828)
(618)
878
(6,568)
1,069
455
(5,044)
At 1 October 2013
Profit for the year
Currency translation differences
Total Comprehensive income for
the year ended 30 September 2014
Dividends
Credit arising on share based payments
At 30 September 2014
Profit for the year
Currency translation differences
Total Comprehensive income for
the year ended 30 September 2015
Dividends
Credit arising on share based payments
At 30 September 2015
Other reserves
At 1 October 2013
Other Comprehensive loss for the year
Credit arising on share based payments
At 30 September 2014
Other Comprehensive gain for the year
Credit arising on share based payments
At 30 September 2015
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.
The notes on pages 23 to 46 form part of these financial statements.
RWS Holdings plc 2015 Annual Report ⁄ 21
New horizons Consolidated Statement of Cash Flows for the year ended 30 September
Cash flows from operating activities
Profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Amortization of intangible assets
Share based payment costs
Finance income
Finance expense
Operating cash flow before movements in working capital and provisions
(Increase)/decrease in trade and other receivables
Increase in trade and other payables and provisions
Cash generated from operations
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Interest received
Purchases of property, plant and equipment
Purchases of intangibles (computer software)
Net cash outflow from investing activities
Cash flows from financing activities
Dividends paid
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Exchange losses on cash and cash equivalents
Cash and cash equivalents at end of the year
Free cash flow
Analysis of free cash flow
Net cash generated from operations
Net interest received
Income tax paid
Purchases of property, plant and equipment
Purchases of intangibles (computer software)
Free cash flow
Note
12
11
12
11
8
20
2015
£’000
2014
£’000
20,652
19,629
824
1,663
455
(71)
251
23,774
(1,529)
2,037
24,282
(5,091)
19,191
76
(1,258)
(33)
(1,215)
(9,796)
(9,796)
8,180
22,479
(90)
30,569
24,282
76
(5,091)
(1,258)
(33)
17,976
599
1,632
878
(57)
14
22,695
64
503
23,262
(5,239)
18,023
108
(4,919)
(78)
(4,889)
(8,738)
(8,738)
4,396
18,305
(222)
22,479
23,262
108
(5,239)
(4,919)
(78)
13,134
The Directors consider that the free cash flow analysis above indicates the cash generated from normal
activities excluding acquisitions and dividends paid.
The notes on pages 23 to 46 form part of these financial statements.
22 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Notes to the Consolidated Financial Statements
1 Accounting policies
Basis of accounting and preparation
of financial statements
RWS Holdings plc is a public limited company
incorporated and domiciled in England and Wales whose
shares are publicly traded on the Alternative Investment
Market of the London Stock Exchange.
The Group financial statements consolidate those of the
Parent Company and its subsidiaries. The Parent Company
financial statements present information about the
Company as a separate entity and not about its Group.
The consolidated financial statements have been
prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the EU, IFRIC
interpretations and Companies Act 2006 applicable to
Companies reporting under IFRSs.
The consolidated financial statements have been
prepared under the historic cost convention as modified,
where applicable, by the revaluation of financial assets
and financial liabilities at fair value through the income
statement.
The principal accounting policies adopted in the
preparation of the consolidated financial statements are
set out below. The policies have been consistently applied
to all the years presented, unless otherwise stated.
The Company has elected to prepare the Company
financial statements in accordance with UK Accounting
Standards. These are presented on pages 48 to 54 and
the accounting policies in respect of Company information
are set out on page 50.
Changes in accounting policies
There were no new standards, interpretations and
amendments, applied for the first time from 1 October
2014, that have had a material effect on the financial
statements.
Certain new standards, amendments and interpretations
to existing standards have been published that are
mandatory for later accounting periods and which have
not been adopted early. There were no new standards,
amendments or interpretations that are expected to have
a material impact on the Group.
The preparation of the financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and judgements that
affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported
amounts of revenues and expenses during the reported
period. Actual results could differ from these estimates.
Judgements include classification of transactions between
the income statement and the balance sheet, whilst
estimations focus on areas such as carrying values and
estimated lives.
Consolidation
A subsidiary is an entity controlled, directly or indirectly.
Control is regarded as the power to govern the financial
and operating policies of the entity so as to benefit from
its activities. The financial results of subsidiaries are
consolidated from the date control is obtained until the
date that control ceases. All intra-group transactions are
eliminated as part of the consolidation process.
On 11 November 2003, RWS Holdings plc became
the legal parent company of Bybrook Limited and its
subsidiary undertakings. The substance of the combination
was that Bybrook Limited acquired RWS Holdings plc in a
reverse acquisition.
Goodwill arose on the difference between the fair value
of the legal parent’s share capital and the fair value of its
net liabilities at the reverse acquisition date. This goodwill
was written-off in the year ended 30 September 2004,
because the goodwill had no intrinsic value.
Business combinations
Under the requirements of IFRS 3 (revised), all business
combinations are accounted for using the acquisition
method (‘acquisition accounting’). The cost of a business
acquisition is the aggregate of fair values, at the date of
exchange, of assets given, liabilities incurred or assumed,
and equity instruments issued by the acquirer. Following
IFRS 3 (revised) becoming effective, costs directly
attributable to business combinations are expensed,
where previously they were treated as part of the cost of
the acquisition.
The cost of a business combination is allocated at the
acquisition date by recognising the acquiree’s identifiable
assets, liabilities and contingent liabilities that satisfy the
recognition criteria, at their fair values at that date. The
acquisition date is the date on which the acquirer effectively
obtains control of the acquiree. An intangible asset, such
as customer relationships or trademarks, is recognised if
it meets the definition of an intangible asset under IAS 38
‘Intangible assets’. The excess of the cost of the acquisition
over the fair value of the Group’s share of the net assets
acquired is recorded as goodwill.
RWS Holdings plc 2015 Annual Report ⁄ 23
New horizons Notes to the Consolidated Financial Statements (continued)
Goodwill and other intangible assets
Intangible assets are stated at historic purchase cost less
accumulated amortization.
Goodwill arising on acquisitions is capitalised and
subject to an impairment review, both annually and when
there is an indication that the carrying value may not
be recoverable. At the date of acquisition, goodwill is
allocated at the lowest levels for which there are separate
identifiable cash flows for the purpose of impairment
testing. Assets which have suffered an impairment are
reviewed for possible reversal of the impairment at each
reporting date.
Intangible assets separately identified from goodwill
acquired as part of a business combination are initially
stated at fair value. The fair value attributable is
determined by discounting the expected future cash
flows to be generated from that asset at the risk adjusted
weighted average cost of capital appropriate to that
intangible asset. The assets are amortized over their
estimated useful lives which range from five to ten years.
Acquired computer software licences are capitalised on
the basis of the costs incurred to acquire and bring to use
the specific software. These assets are amortized using
the straight line method over their estimated useful lives
(not exceeding three years).
Revenue recognition
Group revenue represents the fair value of the
consideration received or receivable for the rendering of
services, net of value added tax and other similar sales
based taxes, rebates and discounts and after eliminating
inter-company sales. Revenue, other than subscription and
commission income, is recognised as a translation, filing
or search is fulfilled in accordance with agreed client
instructions and includes, where contracts are partially
completed, the revenue on the element of the work
performed to date.
Subscription revenue is recognised on a straight line
basis over the term during which the service is provided.
Commission income is credited to revenue upon securing
the related sale.
Accrued income represents the full receivable value of
work performed to date.
Foreign currencies
The individual financial statements of each Group
company are presented in the currency of the primary
economic environment in which it operates (its functional
currency). For the purpose of the consolidated financial
statements, the results and financial position of each
Group company are expressed in pounds sterling,
which is the functional currency of the Company, and
the presentation currency for the consolidated financial
statements.
In preparing the individual financial statements of the
individual companies, transactions in currencies other
than the entity’s functional currency (foreign currencies)
are recorded at the rates of exchange prevailing on
the dates of the transactions. At each reporting date,
monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the rates prevailing
on the reporting date. Non-monetary items that are
measured in terms of historical cost in foreign currency
are not retranslated.
Exchange differences on all transactions are taken to
operating profit in the Statement of Comprehensive
Income.
In the consolidated financial statements, the assets and
liabilities of the Group’s foreign operations are translated
at exchange rates prevailing on the reporting date.
Income and expense items are translated at the average
exchange rates, which approximate to actual rates, for
the relevant accounting period. Exchange differences
arising, if any, are classified as other comprehensive
income and recognised in the Group’s foreign currency
reserve.
Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing
rate. The Group has elected to treat goodwill and fair
value adjustments arising on acquisitions before the date
of transition to IFRSs as sterling-denominated assets and
liabilities.
Segment information
Segment information reflects how management controls
the business. This is primarily by the type of service
supplied and then by the geographic location of the
business units delivering those services. The assets and
liabilities of the segments reflect the assets and liabilities
of the underlying companies involved.
24 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Notes to the Consolidated Financial Statements (continued)
Property, plant and equipment
Property, plant and equipment are stated at historic
purchase cost less accumulated depreciation where cost
includes the original purchase price of the asset and
the costs attributable to bring the asset to its working
condition for intended use. The Group’s policy is to
write off the difference between the cost of each item of
property, plant and equipment and its estimated residual
value systematically over its estimated useful life using the
straight-line method on the following bases:
Freehold land and buildings Nil to 2%
Long leasehold and leasehold improvements – the
length of the lease
Furniture and equipment – 10% to 33%
Motor vehicles – Over six years
All items of property, plant and equipment are tested
for impairment when there are indications that the
carrying value may not be recoverable. Any impairment
losses are recognised immediately in the Statement of
Comprehensive Income. Any assets which have suffered
an impairment are reviewed for possible reversal of the
impairment at each reporting date. The gain or loss on
disposal or retirement of an asset is determined as the
difference between the sales proceeds and the carrying
amount of the asset and is recognised in the Statement of
Comprehensive Income.
Derivative financial instruments
The Group uses derivative financial instruments to manage
its exposure to foreign exchange arising from operational
activities.
Derivative financial instruments are initially measured at
fair value (with direct transaction costs being included in
the Statement of Comprehensive Income as an expense)
and are subsequently remeasured to fair value at each
reporting date. Changes in carrying value are recognised
in the Statement of Comprehensive Income.
Trade and other receivables
Trade and other receivables represent amounts due from
customers in the normal course of business. All amounts
are initially stated at fair value and are subsequently
measured at amortized cost, using the effective interest
rate method.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand,
deposits held at call with banks and highly liquid
investments with original maturities of three months or
less and are subject to an insignificant risk of changes in
value.
Taxation
The tax expense represents the sum of the tax currently
payable and deferred tax. Tax is recognised in the
Statement of Comprehensive Income except to the extent
that it relates to items recognised directly in equity, in
which case it is recognised in equity.
The current tax payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the
Statement of Comprehensive Income because it excludes
items that are not taxable or deductible. The Group’s
current tax assets and liabilities are calculated using tax
rates that have been enacted or substantively enacted by
the reporting date.
Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying amounts
of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of
taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available
against which deductible temporary differences can be
utilised. Deferred tax is calculated using tax rates that
are expected to apply in the period when the liability is
settled or the asset realised based on tax rates that have
been enacted or substantively enacted at the reporting
date.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets
and liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to
settle its current tax assets and liabilities on a net basis.
Employee benefits
The Group operates a defined contribution pension plan
and has no further obligations once the contributions have
been paid. Payments to the plan are recognised in the
Statement of Comprehensive Income as they fall due.
Paid holidays are regarded as an employee benefit and
as such are charged to the Statement of Comprehensive
Income as the benefits are earned. An accrual is made at
RWS Holdings plc 2015 Annual Report ⁄ 25
New horizons Notes to the Consolidated Financial Statements (continued)
the balance sheet date to reflect the fair value of holidays
earned but not yet taken.
Trade and other payables
Trade and other payables are initially measured at fair
value, and are subsequently measured at amortized cost,
using the effective interest rate method.
Provisions
Provisions are recognised when the Group has a present
legal or constructive obligation as a result of a past event
from which it is probable that it will result in an outflow of
economic benefits that can reasonably be estimated.
Leases
Leases where the lessor retains substantially all the risks
and benefits of ownership of the asset are classified
as operating leases. Operating lease rental payments
are recognised as an expense in the Statement of
Comprehensive Income on a straight-line basis over the
lease term. The benefit of lease incentives is spread over
the term of the lease.
Capital
The Group considers its capital to comprise its ordinary
share capital, share premium, other reserves and
accumulated retained earnings. In managing its capital,
the Group’s primary objective is to ensure its continued
ability to provide a consistent return for its equity
shareholders through a combination of capital growth
and distributions. The Group has historically considered
equity funding as the most appropriate form of capital for
the Group but debt financing has been introduced where
it was felt that the benefits of introducing this type of
finance exceed the risks and costs to equity shareholders.
Equity issued by the Company is recorded as the
proceeds received net of direct issue costs.
Share based payments
The Group and Company provide benefits to certain
employees (including certain Executive Directors), in
the form of share based payment transactions whereby
employees render services in exchange for rights over
shares in the form of share options. These equity settled
share based transactions are measured as the fair
value of the share option at the grant date. The fair
value excludes the effect of non market based vesting
conditions. Details regarding the determination of the fair
value of these options can be seen in note 19.
The fair value determined at the grant date of the share
options is expensed on a straight line basis over the
vesting period, based on the Group’s estimate of the
number of share options that will vest. At each balance
sheet date the Group revises its estimate of the number
of options expected to vest as a result of the effect on
non market based vesting conditions. The impact of the
revision of the original estimates, if any, is recognised in
the Consolidated Statement of Comprehensive Income
such that the cumulative expense reflects the revised
estimate with a corresponding adjustment to equity
reserves.
Dividends
Dividend distribution to the Company’s shareholders
is recognised as a liability in the Group’s financial
statements in the period in which dividends are approved
by the Company’s shareholders, or in the case of interim
dividends, when they are paid.
2 Critical judgements and accounting estimates
in applying the Group’s accounting policies
The Group makes certain estimates and assumptions
regarding the future. Estimates and judgements are
evaluated based on historical experience and other
factors, including expectations of future events that are
believed to be reasonable under the circumstances. The
estimates and assumptions are reviewed on an ongoing
basis. In the future, actual experience may vary materially
from management expectation.
Key sources of estimation uncertainty
The following estimates and assumptions are considered
to have a risk of causing a material adjustment to the
carrying amounts of assets and liabilities in the financial
statements.
Impairment of goodwill
Determining whether goodwill is impaired requires an
estimation of the value in use of the cash-generating units
to which goodwill has been allocated. The value in use
calculation requires the Group to estimate the future cash
flows expected to arise from the cash-generating units
and the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects
current market assessments of the time value of money
and the risks specific to the cash-generating unit. More
details on the carrying value of goodwill is included in
note 10.
26 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Notes to the Consolidated Financial Statements (continued)
Share based payments
The Group operates a share based payment scheme.
The charge for share based payments is based on the
fair value of awards at the date of grant which is partly
calculated by use of the Black-Scholes pricing model
which requires judgement to be made regarding volatility,
dividend yield, risk free rates of return and expected
option lives. The inputs used in these pricing models to
calculate the fair values are set out in note 19.
An element of the share based payment charge also relies
on certain assumptions over the future performance of the
share price which may not be met or may be exceeded
by the time the relevant awards vest.
Useful economic lives of intangible
and tangible assets
The useful economic lives and residual values of assets
have been established using historic experience and an
assessment of the nature of the assets involved.
Accruals
Costs which have not been invoiced to the Group are
estimated and recorded as accruals. Judgement is
required where the amount of the costs are not known
and this may differ from the actual cost.
Provisions
Provisions are assessed annually in accordance with the
Group’s accounting policy. Provisions are recognised
when it is probable that an outflow of economic benefits
will occur as a result of a past event or transaction and a
reliable estimate of the outflow can be made. In the event
that estimates are wrong, this may impact the financial
statements in future periods.
Allowance for doubtful debts
Provision is made for receivables where amounts
are considered to be irrecoverable. In the event that
this estimate is wrong , this may impact the financial
statements in future periods.
RWS Holdings plc 2015 Annual Report ⁄ 27
New horizons Notes to the Consolidated Financial Statements (continued)
3 Segment information
The chief operating decision maker has been identified as the Board. The Board reviews the Group’s internal reporting in
order to assess performance and allocate resources, and to date has divided the Group into four reportable segments.
The Board assesses the performance of the segments based on revenue and profit/(loss) from operations. These are
measured on a basis consistent with the income statement.
For this financial year the Group comprises four divisions, Patent and Commercial translations (for management
reporting purposes analysed between UK and Overseas), the Information division, offering a full range of patent search,
retrieval and monitoring services and inovia, a global provider of web-based filing solutions.
This is the final year in which inovia will be treated as a separate segment as this web-based filing business has now
been fully integrated with the Patent and Commercial translations segment (see note 10).
The unallocated segment relates to corporate overheads, assets and liabilities.
The segment results for the year ended 30 September 2015 are as follows:
Revenue
Patent translation
Commercial translation
inovia
Information
Revenue
Operating profit/(loss) before charging:
Amortization of customer relationships and trademarks
Share based payment charges
Profit/(loss) from operations
Finance income
Finance expense
Profit before taxation
Taxation
Profit for the year
Translations
UK
£’000
Translations
Overseas
£’000
inovia
£’000
Information
£’000
Unallocated
£’000
Group
£’000
48,929
10,283
–
–
59,212
17,291
(1,464)
(163)
15,664
4,013
5,578
–
–
9,591
2,099
–
(59)
2,040
–
–
20,405
–
20,405
1,092
–
–
1,092
–
–
–
6,007
6,007
3,114
(143)
–
2,971
–
–
–
–
–
(702)
–
(233)
(935)
52,942
15,861
20,405
6,007
95,215
22,894
(1,607)
(455)
20,832
71
(251)
20,652
(5,124)
15,528
Overseas intercompany revenues to the UK amounting to £6.2 million have been eliminated on consolidation.
28 ⁄ RWS Holdings plc 2015 Annual Report
New horizons
Notes to the Consolidated Financial Statements (continued)
The segment results for the year ended 30 September 2014 are as follows:
Revenue
Patent translation
Commercial translation
inovia
Information
Revenue
Operating profit/(loss) before charging:
Amortization of customer relationships and trademarks
Share based payment (charges)/credit
Profit/(loss) from operations
Finance income
Finance expense
Profit before taxation
Taxation
Profit for the year
Translations
UK
£’000
Translations
Overseas
£’000
inovia
£’000
Information
£’000
Unallocated
£’000
Group
£’000
47,738
10,502
–
–
58,240
16,383
(1,429)
(320)
14,634
4,288
5,499
–
–
9,787
2,175
–
(117)
2,058
–
–
19,373
–
19,373
967
–
–
967
–
–
–
6,156
6,156
3,135
(143)
19
3,011
–
–
–
–
–
(624)
–
(460)
(1,084)
52,026
16,001
19,373
6,156
93,556
22,036
(1,572)
(878)
19,586
57
(14)
19,629
(4,430)
15,199
Overseas intercompany revenues to the UK amounting to £4.8 million have been eliminated on consolidation.
The segment assets and liabilities at 30 September 2015 are as follows:
Total assets
Total liabilities
Capital expenditure
Depreciation
Amortization
Translations
UK
£’000
Translations
Overseas
£’000
78,655
8,507
239
344
1,464
6,276
2,397
151
105
56
The segment assets and liabilities at 30 September 2014 are as follows:
Total assets
Total liabilities
Capital expenditure
Depreciation
Amortization
Translations
UK
£’000
Translations
Overseas
£’000
70,247
6,851
4,614
345
1,429
5,739
1,893
217
94
60
inovia
£’000
6,420
3,694
4
12
–
inovia
£’000
5,448
2,881
6
1
–
Information
£’000
Unallocated
£’000
Group
£’000
6,024
2,585
507
193
143
7,763
2,265
105,138
19,448
390
170
–
1,291
824
1,663
Information
£’000
Unallocated
£’000
6,148
2,709
127
98
143
8,239
3,053
33
61
–
Group
£’000
95,821
17,387
4,997
599
1,632
Capital expenditure comprises additions to property, plant and equipment and intangible assets, including additions
from acquisitions through business combinations.
RWS Holdings plc 2015 Annual Report ⁄ 29
New horizons
Notes to the Consolidated Financial Statements (continued)
Segment assets and liabilities are reconciled to the Group’s assets and liabilities as follows:
Segment assets and liabilities
Unallocated:
Deferred tax
Property, plant and equipment
Non-financial assets
Other financial assets and liabilities
Total unallocated
Assets
2015
£’000
Liabilities
2015
£’000
Assets
2014
£’000
Liabilities
2014
£’000
97,375
17,183
87,582
14,334
196
322
244
7,001
7,763
105,138
1,368
–
522
375
2,265
19,448
250
102
216
7,671
8,239
95,821
1,712
–
483
858
3,053
17,387
Assets allocated to a segment consist primarily of operating assets such as property, plant and equipment, intangible
assets, goodwill, receivables and cash.
Liabilities allocated to a segment comprise primarily trade payables and other operating liabilities.
The Group’s operations are based in the UK, Continental Europe, Asia, United States of America and Australia. The
table below shows turnover by the geographic market in which customers are located.
UK
Continental Europe
Asia, United States of America and Australia
2015
£’000
17,637
45,308
32,270
95,215
2014
£’000
16,511
46,134
30,911
93,556
No customer accounted for more than 7% of Group turnover in either the current or prior year.
The following is an analysis of revenue, carrying amount of assets, and additions to property, plant and equipment and
intangible assets, analysed by the geographical area in which the Group’s undertakings are located.
UK
Continental Europe
Asia, United States of America and Australia
Revenue
2015
£’000
2014
£’000
65,219
5,578
24,418
95,215
64,396
5,499
23,661
93,556
Segment assets
Capital expenditure
2015
£’000
92,442
3,100
9,596
105,138
2014
£’000
84,633
2,588
8,600
95,821
2015
£’000
1,169
74
48
1,291
2014
£’000
4,852
106
39
4,997
30 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Notes to the Consolidated Financial Statements (continued)
4 Profit from operations
This has been arrived at after charging/(crediting):
Staff costs (note 5)
Depreciation of property, plant and equipment and motor vehicles (note 12)
Amortization of intangible assets (note 11)
Foreign exchange gains
Operating lease rentals:
– Property
– Plant and equipment
Auditors’ remuneration
Fees payable to the Company’s auditors and its associates for the audit of the Group’s annual accounts
Fees payable to the Company’s auditors and its associates for other services:
– The audit of the Company’s subsidiaries
– Tax Compliance services
Total fees
5 Staff costs
Staff costs (including directors) comprise:
Wages and salaries
Social security costs
Other Pension costs
Share based payment expense (note 19)
2015
£’000
2014
£’000
25,870
824
1,663
(1,305)
25,632
599
1,632
(481)
623
121
54
95
78
227
627
132
50
95
60
205
2015
£’000
2014
£’000
22,192
2,731
492
455
25,870
21,847
2,493
414
878
25,632
The Group operates a defined contribution pension scheme making payments on behalf of employees to their personal
pension plans.
Payments of £492,000 (2014: £414,000) were made in the year and charged to the income statement in the period
they fell due. At the year end there were unpaid amounts included within Other payables totalling £54,000 (2014:
£53,000).
Details of directors’ remuneration and pension contributions are disclosed in the Directors’ Remuneration Report on
pages 13 to 15.
Key management compensation
Short term employee benefits
Post employment benefits
Share based payments
2015
£’000
2,645
45
455
3,145
2014
£’000
2,466
77
878
3,421
The key management compensation includes the six (2014: six) directors of RWS Holdings plc, the five (2014: five)
members of the Senior Executive Team who are not directors of RWS Holdings plc and the four (2014: four) managing
directors of the operating subsidiary undertakings based overseas.
RWS Holdings plc 2015 Annual Report ⁄ 31
New horizons
Notes to the Consolidated Financial Statements (continued)
The monthly average number of people employed by the Group, including directors and part-time employees, during the
year was:
2015
Number
2014
Number
477
135
612
464
129
593
2015
£’000
2014
£’000
71
57
–
(6)
(245)
(251)
(180)
(1)
–
(13)
(14)
43
2015
£’000
2014
£’000
3,957
1,039
288
5,284
(228)
68
5,124
4,077
717
89
4,883
(395)
(58)
4,430
Production staff
Administrative staff
6 Finance income and expense
Finance income
– Returns on short-term deposits
Finance expense
– Interest on deferred consideration relating to an acquisition.
– Bank interest payable
– Movement in the fair value of foreign currency contracts
Net finance (expense)/income
7 Taxation
Taxation recognised in the income statement is as follows:
Current tax expense
Tax on profit for the current year
– UK
– Overseas
Adjustment in respect of prior years
Deferred tax
Current year movement
Prior year movement
Total tax expense in the Statement of Comprehensive Income
32 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Notes to the Consolidated Financial Statements (continued)
The table below reconciles the UK statutory tax charge to the Group’s total tax charge.
Profit before taxation
Notional tax charge at UK corporation tax rate of 20.5% (2014: 22%)
Effects of:
Items not deductible or not chargeable for tax purposes
Differences in overseas tax rates
Adjustments in respect of prior years
Total tax expense for the year
2015
£’000
20,652
4,234
60
474
356
5,124
2014
£’000
19,629
4,318
(116)
139
89
4,430
Factors that may affect future tax charges
The standard rate of corporation tax in the UK changed from 23.0% to 21.0% with effect from 1 April 2014. Legislation
was enacted to reduce the main rate of corporation tax from 21.0% to 20.0% with effect from 1 April 2015.
The reductions in tax rate to 20% were substantively enacted for the purposes of IAS 12, ‘income taxes’, on 2 July 2013.
As these rate changes have been substantively enacted at the balance sheet date, their effects have been included in
these financial statements.
8 Dividends to shareholders
Final, paid 27 February 2015 (2014: paid 21 February 2014)
Interim, paid 24 July 2015 (2014: paid 25 July 2014)
2015
2015
pence
per share
3.60
1.03
4.63
£’000
7,617
2,179
9,796
2014
* pence
per share
(restated)
3.15
0.98
4.13
2014
£’000
6,665
2,073
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.
RWS Holdings plc 2015 Annual Report ⁄ 33
New horizons Notes to the Consolidated Financial Statements (continued)
9 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:
Weighted average number of Ordinary shares in issue for basic earnings
Dilutive impact of share options
Weighted average number of Ordinary shares for diluted earnings
2015
2014
(restated)
211,579,840
1,086,738
212,666,578
211,579,840
2,053,790
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:
Profit for the year
Adjustments post tax
Amortization of customer relationships, trademarks and technology
Charges for share based payments
Adjusted earnings
10 Goodwill
Cost and net book value
Opening
Exchange adjustments
At 30 September
2015
Basic
earnings
per share
pence
7.3
0.6
0.2
8.1
2014
Basic
earnings
per share
pence
(restated)
7.2
0.6
0.3
8.1
2015
Diluted
earnings
per share
pence
7.3
0.6
0.2
8.1
2014
Diluted
earnings
per share
pence
(restated)
7.1
0.6
0.3
8.0
2015
£’000
2014
£’000
15,528
15,199
1,286
364
17,178
1,242
694
17,135
2015
£’000
2014
£’000
30,512
933
31,445
30,780
(268)
30,512
In the year to 30 September 2015 the Group completed its restructuring and integration of inovia with its core UK patent
translation and filing business. This integration was largely driven by customer feedback but was also a logical step in
order to simplify the Group’s sales and product offering.
Following this work the management of RWS has prepared budgets for the combined entity and consider the smallest
Cash Generating Unit for the integrated business to be RWS Patent and Commercial Translation UK. The figures shown
in the table below reflect this treatment.
During the year, goodwill was tested for impairment. The recoverable amount for each cash-generating unit (“CGU”)
has been determined from value in use calculations. The key assumptions for the value in use calculations are those
regarding discount rates, growth rates and expected changes to selling prices and direct costs during the period. All of
these assumptions have been reviewed during the year. Management estimates discount rates using pre tax rates that
reflect current market assessments of the time value of money and the risk specific to each CGU, this has resulted in a
range of discount rates being used within the calculations.
34 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Notes to the Consolidated Financial Statements (continued)
The growth rates used in the calculations are based on a review of both recently achieved growth rates and a prudent
estimate of likely future growth rates for each specific market sector.
Key assumptions for the value in use calculations are as follows:
Long Term Growth Rate
Discount Rates
Revenue Growth
Translations UK
Translations Continental Europe
Information
2%
2%
2%
11%
11%
12%
5%
3%
6%
Long term growth rate is the rate applied to determine the terminal value at 5 years. The discount rate is the pre-tax
discount rate. Revenue growth is the average annual increase in revenue over the 5 year projection period.
As part of the value in use calculation, management prepares cash flow forecasts derived from the most recent financial
budgets, approved by the Board of Directors for the next 12 months, and extrapolates the cash flows for 5 years based
on an estimated growth rate. This rate does not exceed the expected growth rate for the relevant markets of each CGU.
The Group has conducted a sensitivity analysis on the carrying value of each of the CGU’s. For the Translations UK and
Information CGU’s there are no reasonably possible changes in the key assumptions that could cause the carrying value
of the CGU’s to exceed their recoverable amounts.
For the Continental Europe CGU a reduction in growth rates to -2% or a reduction in long term growth rates to 0%, or
an increase in discount rates to 13% in isolation would cause the carrying value of goodwill in Continental Europe to
equal the recoverable amount.
Based on the result of the value in use calculations undertaken, the Directors conclude that the recoverable amount in the
CGU’s exceeds its carrying value.
The allocation of goodwill to Cash generating units is as follows:
Translations
UK (including inovia)
Continental Europe
Information
At 30 September
2015
£’000
2014
(restated)
£’000
25,701
3,963
29,664
1,781
31,445
24,588
4,143
28,731
1,781
30,512
RWS Holdings plc 2015 Annual Report ⁄ 35
New horizons Notes to the Consolidated Financial Statements (continued)
11 Intangible assets
Cost
At 1 October 2013
Additions
Disposals
Currency translation
At 30 September 2014
Additions
Disposals
Currency translation
At 30 September 2015
Accumulated amortization and impairment
At 1 October 2013
Amortization charge
Disposals
Currency translation
At 30 September 2014
Amortization charge
Disposals
Currency translation
At 30 September 2015
Net book value
At 1 October 2013
At 30 September 2014
At 30 September 2015
Technology
£’000
Trademarks
£’000
Customer
relationships
£’000
Software
£’000
Total
£’000
1,974
–
–
–
1,974
–
–
143
2,117
–
385
–
10
395
415
–
37
847
1,974
1,579
1,270
248
–
–
(16)
232
–
–
(12)
220
248
–
–
(16)
232
–
–
(12)
220
–
–
–
10,801
–
–
(218)
10,583
–
–
89
10,672
2,967
1,187
–
(123)
4,031
1,192
–
(47)
5,176
7,834
6,552
5,496
325
78
(10)
(22)
371
33
(2)
(17)
385
237
60
(6)
(17)
274
56
(2)
(13)
315
88
97
70
13,348
78
(10)
(256)
13,160
33
(2)
203
13,394
3,452
1,632
(6)
(146)
4,932
1,663
(2)
(35)
6,558
9,896
8,228
6,836
Technology, Trademarks and Customer relationships are amortized over 5 to 10 years and Software over not more than
3 years.
36 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Notes to the Consolidated Financial Statements (continued)
12 Property, plant and equipment
Cost
At 1 October 2013
Currency translation
Additions
Disposals
At 30 September 2014
Currency translation
Additions
Disposals
At 30 September 2015
Accumulated depreciation
At 1 October 2013
Currency translation
Depreciation charge
Disposals
At 30 September 2014
Currency translation
Depreciation charge
Disposals
At 30 September 2015
Net book value
At 1 October 2013
At 30 September 2014
At 30 September 2015
Freehold land
and buildings
£’000
Leasehold land,
buildings and
improvements
£’000
Furniture
and equipment
£’000
Motor vehicles
£’000
12,375
–
4,538
–
16,913
–
97
–
17,010
489
–
215
–
704
–
228
–
932
11,886
16,209
16,078
519
–
62
–
581
–
2
–
583
326
–
4
–
330
–
49
–
379
193
251
204
2,342
(39)
319
(9)
2,613
(28)
1,159
(912)
2,832
1,466
(27)
378
(9)
1,808
(16)
537
(912)
1,417
876
805
1,415
79
–
–
–
79
–
–
–
79
32
–
2
–
34
–
10
–
44
47
45
35
Total
£’000
15,315
(39)
4,919
(9)
20,186
(28)
1,258
(912)
20,504
2,313
(27)
599
(9)
2,876
(16)
824
(912)
2,772
13,002
17,310
17,732
RWS Holdings plc 2015 Annual Report ⁄ 37
New horizons Notes to the Consolidated Financial Statements (continued)
13 Deferred tax
The deferred tax assets and liabilities and the movements during the year, before offset of balances within the same
jurisdiction, are as follows:
Accelerated
tax
depreciation
£’000
Other
temporary
differences
£’000
Share
Options
£’000
Deferred tax assets
At 1 October 2013
Credited/(charged) to income
At 30 September 2014
(Charged)/credited to income
At 30 September 2015
Deferred tax liabilities
At 1 October 2013
Charged/(credited) to income
Credited to equity
At 30 September 2014
Charged/(credited) to income
Charged to equity
At 30 September 2015
Deferred tax assets
Deferred tax liabilities
Net deferred tax balance at 30 September
58
111
169
(17)
152
62
(4)
58
(24)
34
Accelerated
tax
depreciation
£’000
294
18
–
312
145
–
457
Total
£’000
270
83
353
(13)
340
150
(24)
126
28
154
Intangibles
£’000
Total
£’000
2,049
(330)
(7)
1,712
(386)
43
1,369
2015
£’000
2,343
(312)
(7)
2,024
(241)
43
1,826
2014
£’000
340
(1,826)
(1,486)
353
(2,024)
(1,671)
Deferred tax is calculated using tax rates that are expected to apply in the period when the liability is settled or the
asset realised based on tax rates that have been enacted or substantively enacted at the reporting date.
38 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Notes to the Consolidated Financial Statements (continued)
14 Trade and other receivables
Trade receivables
Less: allowance for doubtful debts
Other receivables
Prepayments and accrued income
At 30 September
2015
£’000
15,718
(507)
15,211
272
2,424
17,907
2014
£’000
13,792
(144)
13,648
131
2,606
16,385
Trade receivables are non-interest bearing and generally have a 30 day term. Due to their short maturities, the carrying
amount of trade and other receivables approximate to their fair value.
The ageing of trade receivables net of allowances are held in the following currencies:
Sterling
Euros
Japanese Yen
US Dollars
Swiss Francs
Other
The ageing of trade receivables net of allowances at the reporting date was:
Not past due
Past due 1–30 days
Past due 31–60 days
Past due 61–90 days
Past due > 90 days
Movement in allowance for doubtful debts:
At 1 October
Utilised
Charged
At 30 September
2015
£’000
2,495
7,088
437
4,337
684
170
15,211
2015
£’000
9,163
3,855
1,343
505
345
15,211
2015
£’000
144
(26)
389
507
2014
£’000
2,555
6,311
444
3,656
504
178
13,648
2014
£’000
9,191
3,268
805
288
96
13,648
2014
£’000
156
(23)
11
144
Given the profile of the Group’s customers, no further credit risk has been identified with trade receivables other than
those balances for which an allowance has been made.
RWS Holdings plc 2015 Annual Report ⁄ 39
New horizons Notes to the Consolidated Financial Statements (continued)
15 Trade and other payables
Due in less than one year
Trade payables
Other tax and social security payable
Other payables
Accruals and deferred income
At 30 September
2015
£’000
2014
£’000
6,960
1,024
599
6,214
14,797
5,771
1,015
590
4,901
12,277
The carrying amount of trade and other payables approximates to their fair value. Trade payables normally fall due
within 30 to 60 days.
Due in more than one year
Rental deposits
2015
£’000
2014
£’000
30
30
This long term creditor relates to rental deposits received in relation to the leasing of a portion of Randall House.
16 Provisions
Due in less than one year
At 1 October
Utilised
Released to the Statement of Comprehensive Income
Transferred from provisions due in more than one year
At 30 September
2015
£’000
480
(76)
(404)
77
77
2014
£’000
740
(55)
(281)
76
480
A provision made in respect of a claim from a third party, in relation to the acquisition of inovia, has been released
during the year. The cost of settling the claim was successfully recouped from escrow and therefore not borne by the
Group.
Due in more than one year
At 1 October
Utilised
Transferred to provisions due in less than one year
At 30 September
2015
£’000
2014
£’000
378
–
(77)
301
530
(76)
(76)
378
This long term provision relates solely to monthly ongoing future pension payments to a third party and will continue for
the remainder of the recipients life.
40 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Notes to the Consolidated Financial Statements (continued)
17 Financial instruments and financial risk management
Categories of financial instruments
All financial assets other than derivative assets are classified as loans and receivables, and all financial liabilities are
held at amortized cost.
The principal financial assets and liabilities on which financial risks arise are as follows:
Financial assets
Trade and other receivables - current
Foreign exchange derivatives
Cash and cash equivalents
At 30 September
Financial liabilities
Trade and other payables - current
At 30 September
Carrying
value
2015
£’000
16,746
309
30,569
47,624
10,611
10,611
Carrying
value
2014
£’000
15,246
554
22,479
38,279
8,486
8,486
Trade and other receivables – current includes accrued revenue of £1,535,000 (30 September 2014 :£1,598,000).
Trade and other payables – current includes Trade payables, Other tax and social security balances plus certain other
selected accruals.
Financial risk management objectives and policies
The principal financial risks to which the Group is exposed are those of liquidity, interest rate, credit, foreign currency
and capital. Each of these is managed as set out below.
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and,
whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that
ensure the effective implementation of the objectives and policies to the Group’s Finance Director.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the
Group’s competitiveness and flexibility.
Liquidity risk
In addition to its cash balances the Group has an overdraft facility of £1.5 million which was undrawn as at the year
end. Most available funds, after meeting working capital requirements, are invested in sterling, euro and US dollar
deposits with maturities not exceeding three months. Accordingly, liquidity risk is considered to be low.
Interest rate risk
The majority of the Group’s cash balances are held with its principal bankers earning interest at variable rates of
interest. The target yield on deposits is UK base rate plus a margin. To the extent the sterling overdraft is utilised it
attracts a rate of base plus 2%.
RWS Holdings plc 2015 Annual Report ⁄ 41
New horizons Notes to the Consolidated Financial Statements (continued)
The currency profiles of the Group’s cash and cash equivalents at 30 September 2015 are set out below.
Assets – Cash and cash equivalents
Sterling
US Dollars
Euros
Yen
Swiss Francs
Other
Floating
rate
2015
£’000
18,415
4,639
4,983
1,171
1,034
327
30,569
Floating
rate
2014
£’000
9,607
4,324
6,175
961
1,206
206
22,479
If interest rates changed by 1%, the profit and loss impact would not be material to the Group’s results in either the
current or prior year.
The Directors believe that a change of 1% represents a reasonable sensitivity of the Group’s interest rate risk. The
analysis assumes that all other variables remain constant.
Credit risk
The Group is exposed to credit risk on cash and cash equivalents, derivative instruments and trade and other
receivables.
Cash balances, predominantly held in the UK are placed with the Group’s principal bankers who are rated AA by
Standard & Poor’s, and also with an additional two institutions carrying an AA and AA-rating.
Trade receivable exposures are managed locally in the operating units where they arise. The client base tends to be
major blue chip organisations or self regulated bodies such as patent agents and legal firms. As a result the Group
rarely considers a credit check is appropriate but, and where management have doubt, they will use their judgement
and may impose a credit limit or require payment in advance. No client accounts for more than 7% (2014: 7%) of
Group revenues and there were no significant concentrations of credit risk at the balance sheet date.
Provisions for doubtful debts are established in respect of specific trade and other receivables where it is deemed they
may be irrecoverable.
Foreign currency risk
Approximately 51% (2014: 51%) of Group external sales in the reporting period were denominated in Euros and 20% in
US dollars (2014: 20%) while the cost base of the Group is predominantly denominated in sterling.
The Group’s policy is, where possible, to allow Group entities to settle liabilities denominated in the functional currency
with cash generated in that currency from their own operations. Transaction exposures arise from non-local currency
sales and purchases by subsidiaries with gains and losses on transactions arising from fluctuations in exchange rates
being recognised in the income statement.
In entities which have a material exposure the policy is to seek to manage the risk using forward foreign exchange
contracts.
Assets and liabilities of Group entities located in Germany, Switzerland, the United States, Japan, China and Australia
are principally denominated in their respective currencies and are therefore not materially exposed to currency risk. On
translation to sterling gains or losses arising are recognised directly in equity.
42 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Notes to the Consolidated Financial Statements (continued)
The carrying amounts of the Group’s material foreign currency denominated monetary assets and liabilities at the
reporting date are as follows:
Euros
US Dollars
Swiss Francs
Yen
Other
Liabilities
2015
£’000
Liabilities
2014
£’000
2,204
201
1
55
141
2,602
2,052
185
–
408
59
2,704
Assets
2015
£’000
10,287
6,057
1,189
91
237
17,861
Assets
2014
£’000
11,046
5,345
1,277
21
92
17,781
Foreign currency sensitivity analysis
The following table details the Group’s sensitivity to a 10% increase and decrease in sterling against the major
currencies listed in the table above. The sensitivity analysis includes only the outstanding denominated monetary items
and adjusts their translation at the end of the period for a 10% change in the sterling exchange rate. A positive number
below indicates an increase in profit and other equity where sterling weakens against the relevant currency. For a 10%
strengthening of sterling against the relevant currency, there would be an equal and opposite impact on profit and other
equity, and the balances would be negative. The sensitivities below are based on the exchange rates at the reporting
date used to convert the assets or liabilities to sterling.
Euros
US Dollars
Swiss Francs
Yen
Profit and loss impact
2014
£’000
2015
£’000
735
532
108
3
1,378
818
469
116
(35)
1,368
If the exchange rate on uncovered exposures were to move significantly between the year end and date of payment or
receipt there could be an impact on the Group’s profit. As all financial assets and liabilities are short-term in nature this
risk is not considered to be material.
The Group’s derivative financial instruments, which take the form of forward foreign exchange contracts in place at the
year end are as follows:
Forward foreign currency exchange contracts
An analysis of the Group’s forward contracts’ maturity is as follows:
Up to 3 months
3 to 6 months
6 to 12 months
2015
£’000
2014
£’000
309
554
2015
£’000
309
–
–
309
2014
£000
186
105
263
554
RWS Holdings plc 2015 Annual Report ⁄ 43
New horizons Notes to the Consolidated Financial Statements (continued)
Capital risk
The Group considers its capital to comprise its ordinary share capital, share premium, other reserves and accumulated
retained earnings. In managing its capital, the Group’s primary objective is to ensure its continued ability to provide a
consistent return for its equity shareholders through a combination of capital growth and distributions. The Group has
historically considered equity funding as the most appropriate form of capital for the Group but debt financing has been
introduced where it was felt that the benefits exceed the risks and costs to equity shareholders of introducing this type of
finance.
Following dividend payments of £9,796,000, closing reserves are £85,690,000 and there is no external debt finance
as at 30 September 2015.
The Group is not subject to externally imposed capital requirements.
18 Share capital
Authorised
Ordinary shares of 1 pence each (2014: 5 pence)
Allotted, called up and fully paid
At beginning of year
Subdivision of shares
At end of year
2015
Number
2015
£’000
2014
Number
2014
£’000
500,000,000
5,000
100,000,000
5,000
42,315,968
169,263,872
2,116
–
42,315,968
–
211,579,840
2,116
42,315,968
2,116
–-
2,116
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.
19 Share based payment
On 6 April 2013 the Company adopted a new share option scheme for senior employees. Under the scheme, options
to purchase ordinary shares are granted by the Board of Directors, subject to the exercise price of the option being
not less than the market value at the grant date. The options typically vest after a period of 3 years and the vesting
schedule is subject to predetermined overall company selection criteria. In the event that the option holder’s employment
is terminated, the option may not be exercised unless the Board of Directors so permits. The options expire 8 years from
the date of grant.
Number of
approved
options
(restated)
Number of
unapproved
options
(restated)
Exercise
Price (£)
(restated)
Vesting date
Grant
Date
approved
options
unapproved
options
Lapse
Date
139,290
7,971,285
1.292
3 April 2013
3 April 2016
3 April 2015
3 April 2021
A charge of £455,000 (2014: £878,000) has been made in the accounts relating to share options all of which related
to equity settled share based payment transactions.
No options were exercised during the year.
44 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Notes to the Consolidated Financial Statements (continued)
The fair value of the share options is estimated as at the date of grant using the Black-Scholes option pricing model. The
following table lists the range of assumptions applied to the options granted in the respective period shown.
Weighted average share price at grant (£)
Weighted average exercise price (£)
Expected life of option (years)
Volatility (%)
Dividend yield (%)
Risk free interest rate (%)
Option value (£)
Approved
Option Scheme
Unnapproved
Option Scheme
1.292
1.292
3
33.5
2.69
2
1.31
1.292
1.292
2
33.5
2.69
2
1.11
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous
3 years at the date of grant.
20 Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
2015
£’000
15,935
14,634
30,569
2014
£’000
12,990
9,489
22,479
Short-term deposits have original maturity of three months or less. The fair value of these assets supports their carrying
value.
There are no restrictions regarding the utilisation of the Group’s cash resources.
21 Related party transactions
During the year in the normal course of business, RWS provided translation services worth £295,000 (2014: £113,000)
to Learning Technologies Group plc (“LTG”) and Andrew Brode has an interest in this Company. An amount of £30,000
due from LTG at 30 September 2015 was paid in October and November 2015 (2014: £2,000).
22 Commitments and contingent liabilities
The Group had no material capital commitments contracted for but not provided for in the financial statements.
(2014: £nil)
In respect of overdraft facilities, the Company, together with certain subsidiary undertakings, has given to the Group’s
principal bankers cross-guarantees secured by fixed and floating charges over the assets of the Group. At the end of the
year liabilities covered by these guarantees totalled £nil (2014: £nil).
RWS Holdings plc 2015 Annual Report ⁄ 45
New horizons Notes to the Consolidated Financial Statements (continued)
23 Operating lease commitments
Operating lease payments represent rentals payable by the Group for its office properties and certain equipment.
Property leases have various terms, escalation clauses and renewal rights.
At the reporting date, the Group had outstanding commitments for future minimum lease payments
under non-cancellable operating leases which fall due as follows:
Within one year
In the second to fifth years inclusive
After five years
24 Events since the reporting date
2015
£’000
2014
£’000
780
801
365
1,946
771
861
478
2,110
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.
46 ⁄ RWS Holdings plc 2015 Annual Report
New horizons RWS Holdings plc 2015 Annual Report ⁄ 47
New horizons Parent Company
Financial Statements
Parent Company
Financial Statements
Parent Company Financial Statements
The following parent entity financial statements are prepared under UK GAAP and relate to the Company and not to the
Group. The statement of accounting policies which have been applied to these accounts can be found on page 50 and 51.
Company Balance Sheet
at 30 September
Registered Company 3002645
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Capital and reserves
Share capital
Share premium account
Share based payment reserve
Capital reserve
Profit and loss account
Total shareholders’ funds
Note
4
5
6
7
8
8
8
8
8
2015
£’000
15,326
15,326
5,983
7,735
13,718
230
13,488
28,814
2,116
3,583
1,801
2,030
19,284
28,814
2014
£’000
14,871
14,871
5,984
6,535
12,519
145
12,374
27,245
2,116
3,583
1,346
2,030
18,170
27,245
The financial statements on pages 49 to 54 were approved by the Board of Directors and authorised for issue on
7 December 2015 and were signed on its behalf by:
Andrew Brode
Director
RWS Holdings plc 2015 Annual Report ⁄ 49
New horizons Notes to the Company Financial Statements
1 Accounting policies
Basis of preparation
These financial statements present financial information for RWS Holdings plc as a separate entity, and have been
prepared in accordance with the historical cost convention, the Companies Act 2006 and United Kingdom Accounting
Standards (UK Generally Accepted Accounting Practice). The Company’s Consolidated Financial Statements, prepared
in accordance with International Financial Reporting Standards as adopted by the European Union, are separately
presented. The principal accounting policies adopted in these company financial statements are set out below and,
unless otherwise indicated, have been consistently applied for all periods presented.
In accordance with FRS 18, Accounting policies, the Directors have reviewed the accounting policies of the Company as
set out below and consider them to be appropriate.
Going concern
The Directors believe that preparing these financial statements on the going concern basis is appropriate based on cash
flow projections for the foreseeable future.
Related party transactions
The Company is exempt under the terms of FRS 8, Related party disclosures, from disclosing related party transactions
with entities that are part of the Group.
Cash flow statement
The cash flows of the Company are included in the consolidated cash flow statement of RWS Holdings plc which is
included in this annual report. Consequently, the Company is exempt under the terms of FRS1 (revised) from publishing a
cash flow statement.
The principal accounting policies are:
Investments
Investments are stated at cost less provision for impairment. Cost includes capital contributions arising from share
options.
Pensions
Contributions to personal pension plans are charged to the profit and loss account in the period in which they fall due.
Dividend distribution
Interim dividends are recorded when they are paid and the final dividends are recorded when they become legally
payable.
Taxation
Current tax, including UK corporation tax, is provided at amounts expected to be paid (or recovered) using the tax rates
and laws that have been enacted or substantively enacted by the balance sheet date.
Share based payments
The Group and Company provide benefits to certain employees (including certain Executive Directors), in the form of
share based payment transactions whereby employees render services in exchange for rights over shares in the form
of share options. These equity settled share based transactions are measured as the fair value of the share option
at the grant date. The fair value excludes the effect of non market based vesting conditions. Details regarding the
determination of the fair value of these options can be seen in note 19 of the consolidated financial statements.
The fair value determined at the grant date of the share options is expensed on a straight line basis over the vesting
period, based on the Group’s estimate of share options that will vest. At each balance sheet date the Group revises its
estimate of the number of options expected to vest as a result of the effect on non market based vesting conditions. The
50 ⁄ RWS Holdings plc 2015 Annual Report
New horizons Notes to the Company Financial Statements (continued)
impact of the revision of the original estimates, if any, is recognised in the Consolidated Statement of Comprehensive
Income such that the cumulative expense reflects the revised estimate with a corresponding adjustment to equity
reserves.
Where the share options are awarded to employees of subsidiaries, the amount of the charge is passed down to the
subsidiary in the form of a capital contribution which is recognised as an increase in the investment in that subsidiary.
2 Profit for the year
The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included its own Profit and
Loss Account in these financial statements. The Company profit after tax for the year ended 30 September 2015 under
UK GAAP was £10,910,000 (2014: £7,305,000).
Audit fees payable in relation to the audit of the financial statements of the Company are £54,000 (2014: £50,000).
Fees paid to PwC LLP and its associates for non-audit services to the Company itself are not disclosed in the individual
accounts of RWS Holdings plc because the Company’s consolidated accounts are required to disclose such fees on a
consolidated basis.
3 Directors and employees
There were no employees (2014: nil) of the Company other than the Directors.
The remuneration of the Directors of RWS Holdings plc for services in all capacities is set out below:
Directors’ emoluments
Pension costs – paid to the Director’s personal pension scheme
2015
£’000
998
17
1,015
2014
£’000
952
31
983
During the year the Company had 6 (2014: 6) Directors, including three Non-Executive Directors, providing services to
the Group.
During the year 2 directors (2014: 3) received contributions to their personal pension schemes.
Emoluments of the highest paid Director:
Emoluments
Pension costs – paid to the Director’s personal pension scheme
2015
£’000
350
10
360
2014
£’000
339
9
348
Details of Directors’ remuneration and pension contributions are disclosed in the Directors’ Remuneration Report on
pages 13 to 15.
RWS Holdings plc 2015 Annual Report ⁄ 51
New horizons Notes to the Company Financial Statements (continued)
4 Investments
Cost and net book value at beginning of year
Additions – capital contributions
Cost and net book value at end of year
2015
£’000
14,871
455
15,326
2014
£’000
13,993
878
14,871
The Directors consider that the value of the Company’s fixed asset investments, which are listed below, is supported by
their underlying assets.
The following were the wholly owned subsidiary undertakings and have been consolidated in the financial statements:
Country of incorporation
Nature of business
Beijing RWS Science & Technology Information
Consultancy Co. Ltd
Bybrook Limited
Communicare Limited
Davda & Associates Limited
Eclipse Translations Limited
inovia Pty Holdings Limited
inovia LLC
inovia Europe GmbH
Japanese Language Services Limited
KK RWS Group
Lawyers’ and Merchants’ Translation Bureau Inc
PharmaQuest Limited
Plastics Translations Limited
RWS Group Deutschland GmbH – including RWS Group GmbH
that was merged into this Company during the year.
RWS Group Limited
RWS Information Limited
RWS (Overseas) Limited
RWS Schweiz GmbH (formerly Ifama GmbH)
RWS Translations Limited
RWS Vault Limited
Tributary Limited
China
England
England
England
England
Australia
USA
Germany
England
Japan
USA
England
England
Germany
England
England
England
Switzerland
England
England
England
Patent, technical and legal translations
Holding company
Technical and legal translations
Patent and technical information searches
Technical and legal translations
Patent translations
Patent translations
Patent translations
Technical and legal translations
Patent, technical and legal translations
Technical and legal translations
Technical and medical translations
Holding company
Technical and legal translations
Holding company
Patent and technical information searches
Holding company
Technical and legal translations
Patent, technical and legal translations
Holding company
Holding company
All subsidiary undertakings, except RWS Group Limited, Bybrook Limited and RWS Vault Limited, are held indirectly.
5 Debtors
Amounts owed by Group undertakings
Other debtors
Prepayments
Amounts due within one year
52 ⁄ RWS Holdings plc 2015 Annual Report
2015
£’000
5,942
14
27
5,983
2014
£’000
5,942
14
28
5,984
New horizons Notes to the Company Financial Statements (continued)
6 Creditors: amounts falling due within one year
Trade Creditors
Amounts owed to group undertakings
Accruals
2015
£’000
9
103
118
230
2014
£’000
6
36
103
145
The amounts owed both by and to Group undertakings are repayable on demand and classified as due within one year.
7 Share capital
Authorised
Ordinary shares of 1 pence each (2014: 5 pence)
Allotted, called up and fully paid
At beginning of year
Subdivision of shares
At end of year
2015
Number
2015
£’000
2014
Number
2014
£’000
500,000,000
5,000
100,000,000
5,000
42,315,968
169,263,872
211,579,840
2,116
–
2,116
42,315,968
–
42,315,968
2,116
–
2,116
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.
8 Shareholders’ funds and movements on reserves
At beginning of year
Credit arising on share based payments
Dividends
Profit for the year
At end of year
Share
capital
£’000
2,116
–
–
–
2,116
Share
premium
account
£’000
Share
based payment
reserve
£’000
3,583
–
–
–
3,583
1,346
455
–
–
1,801
Capital
reserve
£’000
2,030
–
–
–
2,030
Profit & loss
account
£’000
18,170
–
(9,796)
10,910
19,284
Total
Shareholders’
funds
£’000
27,245
455
(9,796)
10,910
28,814
The balance on the capital reserve is an amount not distributable to shareholders and not transferred to the profit and
loss account.
RWS Holdings plc 2015 Annual Report ⁄ 53
New horizons Notes to the Company Financial Statements (continued)
9 Reconciliation of movements in shareholders’ funds
Opening shareholders’ funds
Profit for the year
Credit arising on share based payments
Dividends paid
Shareholders’ funds at end of year
2015
£’000
27,245
10,910
455
(9,796)
28,814
2014
£’000
27,800
7,305
878
(8,738)
27,245
10 Guarantees and other financial commitments
In respect of overdraft facilities, the Company, together with certain subsidiary undertakings, has given to the Group’s
principal bankers cross-guarantees secured by fixed and floating charges over the assets of the Group. At the end of the
year liabilities covered by these guarantees totalled £nil (2014: £nil).
11 Related party transactions
The Company has taken advantage of the exemption allowed under Financial Reporting Standard No 8 “Related Party
Transactions” not to disclose any transactions or balances with entities which are part of the Group as consolidated
financial statements of the ultimate parent company are available from Companies House.
12 Post balance sheet events
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. Further details are provided in note 24.
54 ⁄ RWS Holdings plc 2015 Annual Report
New horizons RWS Holdings plc 2015 Annual Report ⁄ 55
New horizons Registrars
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The Registry
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Independent Auditors
Pricewaterhouse Coopers LLP
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Solicitors
Olswang
90 High Holborn
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Principal bankers
Barclays Bank plc
Level 28
1 Churchill Place
Canary Wharf
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Shareholder information
Corporate headquarters
and Registered office
No. 3002645
Europa House
Chiltern Park
Chiltern Hill
Chalfont St Peter
Buckinghamshire
SL9 9FG
United Kingdom
Tel: +44 (0)1753 480200
Fax +44 (0)1753 480280
Public relations advisers
MHP Communications
6 Agar Street
London WC2N 4HN
Tel: +44 (0)20 3128 8100
Nominated adviser and broker
Numis Securities Ltd
London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Tel: +44 (0)20 7260 1000
56 ⁄ RWS Holdings plc 2015 Annual Report
New horizons www.rws.com
RWS Holdings plc 2015 Annual Report
Europa House
Chiltern Park
Chiltern Hill
Chalfont St Peter
Bucks
SL9 9FG
United Kingdom
Telephone +44 (0) 1753 480 200
Facsimile +44 (0) 1753 480 280
rws@rws.com