Annual Report
2018
r ws.com
3
Welcome to our 2018
annual report. This has
been a remarkable year in
which we celebrated our
60th year in business and
delivered our 15th year of
unbroken growth in revenues,
profits and dividends since
flotation in November 2003.
We have made a very good
start to the new financial
year and we look forward
to 2019 with confidence.
PERFORMANCE REVIEW
Company Overview
Operating Highlights
Chairman’s Statement
Strategic Report
GOVERNANCE REPORT
Chairman’s Governance Overview
Board of Directors
Corporate Governance Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
FINANCIAL STATEMENTS
Independent Auditor’s Report to the Members of RWS Holdings plc
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Parent Company Financial Statements
Notes to the Parent Company Financial Statements
04
06
08
11
18
20
22
25
26
30
34
36
42
43
44
45
46
76
78
86
Shareholder Information
Annual Report 2018
Company Overview
4
Contents
Company Overview
5
Contents
Company Overview
RWS is a world-leading provider of
translation and localization, intellectual
property (IP) support solutions and
life sciences language services.
Over the last 60 years, we have built a
reputation for quality, reliability and flexibility
with our global team of linguists, searchers
and technical experts.
Our specialist divisions combine the
latest technology, proven processes and
highly-skilled staff to deliver complex
services at each stage of the product
life cycle to meet the diverse needs
of a global, blue-chip client base.
Our services are delivered in accordance with
ISO 9001, ISO 17100 and ISO 13485 and are
trusted by world-leading companies across
a range of sectors including technology,
pharmaceutical, medical, chemical,
automotive and telecommunications.
With headquarters in the UK, we have 30
offices worldwide and are publicly listed on
the Alternative Investment Market (AIM), the
London Stock Exchange regulated market.
30 Offices
worldwide
12 Clients
on Fortune’s
top 20 most
admired
companies
list
Following the acquisition of Moravia, the Group operated as five divisions:
RWS Patent Translation & Filing
RWS offers the highest-quality patent translations and a seamless global
patent filing experience.
inovia, our online filing platform, is an innovative, cost-effective and
highly-efficient resource that allows clients to execute their foreign
filing flawlessly and significantly reduce the administrative burden,
complexity and cost of foreign filing.
RWS Patent Information
RWS leads the search service industry with traditional research services
combined with crowdsourcing solutions, all powered by proprietary,
innovative technology.
We serve a global client base with our in-house search teams and extensive
network of over 42,000 researchers, providing powerful solutions to assist
with strategic decision-making across the entire IP life cycle.
RWS Life Sciences
RWS provides a full suite of language services exclusively for the life
sciences industry.
This includes language solutions for clinical trial management and
linguistic validation of Clinical Outcomes Assessments (COAs), with
extensive experience in a variety of therapeutic areas, regulatory
affairs, medical device documentation, marketing communications and
e-learning and training programmes.
Moravia
RWS works primarily with global technology companies to help them
provide high-quality, localized products and content to their consumers
worldwide.
Our Go Global Model offers a holistic approach to localization that
ensures even the most complex products and content succeed in all
locations, at scale. Its five-phase system is designed to offer flexibility
while powering international expansion.
RWS Language Solutions
RWS offers a full range of translation and interpreting services to help
businesses communicate globally.
With expertise across a range of different industries, our experienced
teams combine the latest technology, proven processes and the best
linguists to deliver the right solution to meet the different needs of each
organization.
Annual Report 2018Annual Report 2018
Operating Highlights
6
Contents
Operating Highlights
7
Contents
Operating Highlights
Annual revenue (£m)
Revenue split by division (£m)
Moravia
126.9m
42%
Patent
Translation &
Filing
102.3m
33%
Life Sciences
52.3m
17%
Language
Solutions
Patent
Information
14.9m
9.7m
5%
3%
2018
306.0m
2017
164.0m
2015
95.2m
2013
77.4m
2011
65.4m
2009
55.7m
2007
46.2m
2005
35.9m
2003
27.3m
Note: Unless otherwise indicated, all figures relate to FY 2018 (1 October 2017 – 30 September 2018),
including an 11-month contribution from Moravia following acquisition in November 2017.
2,459
FTE employees
including 577
specialist translators,
revisers, testers
and QA staff
1.5+ billion
Words
translated
65,900
IP
validations/filings
63,671
Life science
projects
2,400
Patent
searches
2,891
Interpreting
projects
150+
Languages
supported
4,390
Active clients*
*includes 925
new clients
Adj PBT (£m)
61.8m
2018
m
3
.
3
4
m
6
.
0
3
m
7
.
2
2
m
1
2
2
.
m
0
.
1
2
m
2
7
1
.
m
2
.
6
1
m
6
.
4
1
m
5
.
4
1
m
9
.
3
1
m
0
.
1
1
m
0
.
9
m
4
7
.
m
0
.
6
m
6
.
5
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
Annual Report 2018Annual Report 2018 Chairman’s Statement
8
Contents
Chairman’s Statement
9
Chairman’s Statement
Andrew Brode, Chairman
10 December 2018
RWS, which
celebrated its 60th
year in business in
2018, has grown
to become one of
the world’s leading
providers of language
services.
Following the transformational
acquisition of Moravia in November
2017, which won “Transaction of the
Year” at the recent AIM Awards, the
Group now employs almost 2,500
people with operations across five
continents.
We announced in June 2015 that our
strategy for growth would focus on
the United States to 2020, and that
beyond 2020 we believed that China
would become an important area for
growth. Since that announcement,
RWS has made four acquisitions with
a US focus and built market-leading
activities in intellectual property
support services, in life sciences and
in technology-enabled localization.
China shows every sign of fulfilling
the strategic growth potential we
envisaged in 2015.
Performance
The Group delivered revenues of
£306.0m, growing 87% over 2017
(£164.0m). The Moravia acquisition
was by far the most significant
contributor to this substantial
increase, but all divisions delivered
growth, contributing to 5% organic
revenue growth across the Group
(excluding acquisitions and currency
movements).
Transformational acquisition
of Moravia in November 2017,
which won “Transaction of the
Year” at the recent AIM Awards.
All divisions delivered growth,
contributing to 5% organic
revenue growth across the
Group (excluding acquisitions
and currency movements).
The balance sheet remains
strong with net assets
more than doubling to
£355.3m (2017: £158.9m).
Adjusted profit before tax grew
by 43% to £61.8m (2017: £43.3m),
reflecting an 11-month contribution
from Moravia. Adjusted profit before
tax increased by 6% on an organic
(excluding acquisitions and related
additional borrowing costs) and
constant currency basis. Our balance
sheet remains strong with net assets
more than doubling to £355.3m
(2017: £158.9m). Net debt was
£65.1m (2017: £20.2m) despite the
£66.8m cash outflow for the Moravia
acquisition, in addition to the £185m
gross placing proceeds raised to
fund it, signifying continued strong
underlying cash generation from
which we have also repaid £17.8m
of borrowings during the year. As a
result, leverage (net debt: EBITDA1)
at the year-end was a comfortable 1
times.
I am proud that RWS has delivered
increases in revenues, profits
and dividends in every year since
flotation in November 2003.
//
The Group is now
a well-balanced
business with a
more diversified
service offering and
an enhanced global
presence, providing
a strong platform
for developing
sales opportunities
across our full
suite of services
and technology
platforms to new
and existing clients.
1 EBITDA – profit before tax adjusted for interest, depreciation and amortization.
//
We announced in
June 2015 that our
strategy for growth
would focus on
the United States
to 2020, and that
beyond 2020 we
believed that China
would become an
important area for
growth.
REVENUES
£306.0m
Growing 87%
over 2017
ADJUSTED PROFIT
BEFORE TAX
£61.8m
Grew by 43%
(2017: £43.3m)
DIVIDEND
6.0p
per share
An increase of
15% compared
to 2017
People and Board
The Group’s advancement to being
one of the top tier global language
service providers is testament to
the efforts of every single colleague
who has helped to make it happen.
RWS is a quintessential “people”
business, dedicated to providing
superior quality of service to a cross
section of the world’s largest and
most demanding clients. The Board
is determined to continue investing
in the development of our staff and
helping them to realize their full
potential. I would like to thank the
senior management team and all our
hard-working employees.
I would also like to thank my
fellow Directors for their advice
and dedication. The Board was
strengthened in early 2018 by the
appointment of Tomas Kratochvíl.
Tomas was the long serving CEO of
Moravia, and upon his retirement
from that role, we were delighted
that he accepted our invitation to join
the RWS Holdings plc Board, enabling
us to benefit from his wealth of
language industry knowledge.
Tomas was succeeded at Moravia by
Paul Danter, who has delivered an
excellent second-half performance
from this milestone acquisition.
Dividend
The Group adopted a progressive
dividend policy upon flotation in
November 2003 and has delivered
on this policy every year. The highly
cash generative business model and
modest capex requirements have
combined to permit servicing of
acquisition related debt, continued
organic investment in the business
and an increasing dividend.
The Board is, therefore, pleased to
recommend a final dividend of 6.0p
per share which, together with the
interim dividend of 1.5p per share,
will make a total dividend for the year
ended 30 September 2018 of 7.5p per
share, an increase of 15% compared
to 2017. Subject to approval at the
AGM, it will be paid on 22 February
2019 to shareholders on the register
as at 25 January 2019.
Contents
The highly cash generative
business model and modest
capex requirements have
combined to permit:
1) servicing of acquisition
related debt
2) continued organic
investment in the business
3) an increasing dividend
Summary and outlook
This has been a remarkable year with
our fast expanding Group delivering
profitable organic and acquisitive
growth and strong cash conversion.
The Group is now a well-balanced
business with a more diversified
service offering and an enhanced
global presence, providing a strong
platform for developing sales
opportunities across our full suite of
services and technology platforms to
new and existing clients.
The new financial year has begun in a
very promising manner and we look
forward to 2019 with confidence.
Our leading intellectual property
support services, life sciences and
technology-enabled localization
businesses are well placed to
take advantage of the multiple
opportunities in their growing
markets and, backed by a strong
balance sheet, we are positioned to
take advantage of further acquisition
opportunities as they arise.
It remains a distinct pleasure to chair
a fast expanding Group delivering
profitable growth and strong cash
conversion, in a business sector
which is also growing and offering
multiple opportunities.
Andrew Brode, Chairman
10 December 2018
Annual Report 2018Annual Report 2018 Strategic Report
11
Contents
Strategic Report
Richard Thompson, Chief Executive Officer
10 December 2018
RWS is one of the world’s leading providers
of language services, focusing on key market
segments where the quality of its services is
of critical importance to its clients. The Group
has a blue-chip multinational client base
spanning Europe, North America and Asia.
Following the acquisition of Moravia, the Group operated as five divisions:
RWS Patent Translation & Filing is the world’s premier supplier of patent
translations and filing solutions. RWS differentiates itself from the
competition through the quality of its translations, its high level of intellectual
property expertise, its customer service and the use of its international web-
based patent filing platform, inovia. Uniquely the business employs over 130
full-time, highly qualified translators.
RWS Patent Information provides 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 as an
annual subscription service.
RWS Life Sciences focuses solely on the language service needs of the life
sciences market, providing technical translations and linguistic validation to
large pharmaceuticals and clinical research organizations in North America,
Europe and Asia. This division was formed on 1 October 2017 following the
integration of CTi and LUZ.
Moravia works with many of the world’s largest publicly traded technology
companies to manage their complex localization needs and ensure brand
consistency as they grow globally. This includes the adaptation of content,
software, websites, applications, marketing materials and audio/video for
hundreds of languages and geographies.
RWS Language Solutions operates from the UK, Germany and the US, and
provides commercial translation solutions with a particular emphasis on
technical translations, as well as operating the Group’s interpreting service.
On 1 October 2018, we completed the assimilation and rebranding of Moravia
to RWS Moravia.
With effect from 1 October 2018, RWS Patent Translation & Filing and RWS
Patent Information were merged to form RWS IP Services. In future, we will
report on their performance as one segment.
150+
Languages
supported
20,000+
In-country
freelance
translators
Annual Report 2018 Strategic Report
12
Contents
Strategic Report
13
Contents
Strategic Report
(continued)
Our strategy
To profitably grow the business,
we are focused on providing an
increasing range of appropriate
services to existing and new clients.
Organic growth is supplemented
by selective acquisitions that are
complementary to our existing
business and enhance shareholder
value.
Organic growth is driven by:
> the growing demand for
language services driven by
globalization and international
trade
> an increase in the worldwide
patent filing activities of
existing multinational clients
> the development of new drugs
by the pharmaceutical industry
> the outsourcing by corporates,
clinical research organizations,
law firms and attorneys of all
or part of their foreign patent
search, filing, translation,
localization and linguistic
validation processes
> the Group’s ability to attract
new clients by its leading
position and reputation in an
otherwise highly fragmented
sector
> the Group’s ability to expand
in new or existing but growing
geographies
> an increase in cross divisional
selling of the Group’s suite of
services
m
0
.
1
3
4
0
0
2
m
3
7
2
.
3
0
0
2
Patent Translation & Filing
Patent Information
Life Sciences
Moravia
Language Solutions
£102.3m
Revenues
up 5%
£9.7m
Revenues
up 26%
£52.3m
Revenues
up 15%
£126.9m
2017:
£111.5m1
£14.9m
Revenues
up 13%
1 FY 2017 figures are pre-acquisition and
have been converted from USD to GBP at the
average FY 2018 rate. These figures exclude FX
on the pre-acquisition bank debt, bank interest
and hedging gains.
Annual Revenue (£m)
306.0m
2018
Adj PBT (£m)
61.8m
2018
m
0
.
4
6
1
m
0
.
2
2
1
m
2
.
5
9
m
6
.
3
9
m
4
7
7
.
m
8
.
8
6
m
4
.
5
6
m
1
4
5
.
m
7
.
5
5
m
6
.
0
6
m
2
.
6
4
m
9
.
5
3
m
8
.
0
4
m
7
.
2
2
m
1
2
2
.
m
0
.
1
2
m
2
7
1
.
m
2
.
6
1
m
6
.
4
1
m
5
.
4
1
m
9
.
3
1
m
0
.
1
1
m
0
.
9
m
4
7
.
m
0
.
6
m
6
.
5
m
3
.
3
4
m
6
.
0
3
*
Country with largest volume of
sales: United States
In terms of acquisitions to further
accelerate growth, we look for
selective opportunities in the
intellectual property services and
specialist language services spaces.
We seek businesses capable of
delivering above industry average
levels of profitability, which are
highly complementary and are
capable of reinforcing the Group’s
dominant position in intellectual
property support and language
services.
We are particularly pleased to be
able to show our progress against
this strategy with 15 consecutive
years of growth in revenues and
profits since flotation.
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
Annual Report 2018Annual Report 2018
Strategic Report
14
Contents
Strategic Report
15
Strategic Report
(continued)
Market update
Global language services market
In June 2018, Common Sense Advisory published its 14th
study of the market for outsourced language services.
This year the market is estimated to reach US$46.5bn
(2017: US$43.1bn), continuing the unbroken growth
record since 2009 (CAGR: 7.9%). Increased demand for
content from a growing and increasingly interconnected
world is fuelling this demand for high-quality localization.
Global life sciences market
In its 2018 Global Life Sciences Outlook, Deloitte
estimates that the life sciences market will reach
US$1,060bn by 2022, representing a CAGR of 6.5% since
2017. Growth in the life sciences sector is closely tied to
global healthcare expenditures, which continues to grow
as a result of ageing and growing populations, developing
market expansion and clinical and technological
advances. For pharmaceutical/biotechnology, medical
device companies and contract research organizations,
this means more content that needs to be translated.
Patent filing statistics
The World Intellectual Property Organization (WIPO) has
published figures showing a 4.5% worldwide increase in
patent applications filed under the Patent Cooperation
Treaty (PCT) in 2017. This is the eighth consecutive year
of growth, with approximately 243,500 applications
being received. The largest number of filers continue
to be located in the United States, but the number of
applications from China continues to grow, driven by
Huawei and ZTE, who are the top two filers globally. The
European Patent Office (EPO) reports European patent
filings remained at record levels with 310,784 applications
in 2017 - an increase of 4.4%.
Operating review
RWS Patent Translation & Filing
The Group’s patent translation and filing business
represented 33% of Group sales in the year and
grew revenues by 5% to £102.3m (2017: £97.8m). This
performance reflects earlier client wins and good organic
growth from the established core client base, especially
for our Worldfile offering (+9%), plus further strong
growth in China (+18%) and Japan (+9%). The annual
growth in the division’s other key market, Eurofile, was
a more modest 1%. This reflected strong comparatives
in H1 (due to a change in procedures in FY 2017 at the
European Patent Office) which resulted in a 4% decline in
sales in H1 2018 compared to H1 2017. However, H2 was
much stronger with a 7% increase compared to H2 2017
and in total the division grew H2 sales by 9%.
During the year, the division achieved several new client
wins, including a notable piece of business that resulted
from cross-selling, which has recently started to generate
revenue. This, combined with the record numbers of new
patent applications in 2017 (see Market update), provides
firm grounds for confidence in the outlook for FY 2019.
China continues to be our long-term strategic revenue
growth market and the region continues to attract North
American and European patent filers seeking patent
protection there. This in turn has driven our headcount
in China to 103 employees (2017: 87), including further
investment in the sales team who are successfully
developing business with both local companies and
patent attorneys. It is worth noting that following the
acquisition of Moravia, the Group now has approximately
300 employees in China.
The division’s improved margins resulted in an adjusted
operating profit up 15% to £30.9m (2017: £26.9m), driven
by revenue growth, a very tight control of overheads and
a favourable swing in exchange rates.
42,000+
Researchers
in our AOP Connect™
Crowd
113
Jurisdictions covered
by foreign filing
platform, inovia
Clients
Include all of the top
10 pharma, 8 of the
top 10 CROs and 7 of
the top 10 medical
device companies
RWS Patent Information
The patent information business accounted for 3% of
Group sales during the year and it reported revenues
up 26% to £9.7m (2017: £7.7m), which translated to a 7%
increase on an underlying1 basis. This reflected strong
growth in both the search business (up 8% due to a good
flow of regular work from existing clients) and the high
margin PatBase subscription service (up 6%), in addition
to a full year’s trading from the Article One Partners
(AOP) business acquired on 29 September 2017, which
contributed an incremental £1.5m of revenue.
AOP’s operations were fully integrated into RWS Patent
Information on 1 October 2018, and its underlying
technology is now being used as the division’s sole client
portal, allowing the business to deliver search services in
the United States. In addition, through successful cross-
selling, it has provided the Patent Translation & Filing
division with a major new client. Following its acquisition,
AOP’s cost base was rationalized in line with our plan and
the business exited the year with a profitable run rate.
The division recorded an adjusted operating profit of
£3.6m (2017: £4.1m) reflecting 7% growth in search and
PatBase profits, offset by an £0.8m loss from AOP, in line
with expectations.
RWS Life Sciences
The Group’s Life Sciences division accounted for
approximately 17% of the Group’s sales in the year at
£52.3m (2017: £45.3m).
The results of this division include a full 12 months of
sales from LUZ (2017: 8 months). Underlying1 organic
revenue growth for the division was 2%, reflecting a
strong performance in the first half of the year driven
by growth in revenue with key clients, offset by a more
challenging second half with slower trade from some of
its core clients, in part driven by lower levels of activity in
medical devices whilst new regulations come into force.
We have reviewed the management structure in Life
Sciences and invested in sales staff and training, and the
business has started the year in line with expectations.
The financial benefits of the integration of the LUZ
and CTi businesses were seen in the 2018 margin
improvement with adjusted operating profit increasing by
21% to £14.5m (2017: £12.0m).
During the year, the division expanded its operations into
the Asia Pacific region to capitalize on the growth in the
pharmaceutical market and to better serve its existing
client base. This measured investment in staff in Japan
and China will continue in FY 2019.
1 Calculated excluding acquisitions and at constant currency.
2 FY 2017 figures are pre-acquisition and have been converted from USD
to GBP at the average FY 2018 rate. These figures exclude FX on the pre-
acquisition bank debt, bank interest and hedging gains.
Contents
Moravia
Moravia was acquired on 3 November 2017 and operates
as a standalone division. In the 11 months to 30
September 2018, Moravia achieved revenues of £126.9m
(11 months 2017: £111.5m2) and adjusted operating profit
of £17.0m (11 months 2017: £15.2m2).
As reported in the Group’s first half results, the business
experienced a difficult first five months of trading with
foreign exchange headwinds, lower sales from a major
client, higher than expected overheads and a lower than
expected volume of activity from new business wins.
However, the division achieved a much improved second
half performance due to good sales growth with many
of its top clients, a targeted reduction in the cost base,
tighter control of overheads and an improved USD:GBP
exchange rate environment. The adjusted operating
profit in the five months to 31 March 2018 was £4.7m
(2017: £4.3m2), improving markedly to £12.3m (2017:
£11.8m2) in the six months to 30 September 2018.
In addition, the reorganization of the division’s
management team has improved focus, communication
and efficiency. The business has also been pivotal in
cross-sell wins across the Group and these gains should
accelerate as the divisional sales teams receive further
training.
The outlook for the division for FY 2019 is positive,
following several new client wins during the year which
will gradually build revenue through FY 2019.
On 1 October 2018 the division was rebranded RWS
Moravia.
RWS Language Solutions
The RWS Language Solutions division accounted for 5% of
Group sales, with a 13% increase in revenues to £14.9m
(2017: £13.2m), reflecting growth with existing clients and
the addition of several new clients. We were particularly
pleased to have won the work for a multinational
pharmaceuticals company across both our UK and
German operations, in addition to our success in growing
our work across the renewable energy, automotive and
legal sectors. Language Solutions remains the division
most exposed to competition and therefore focuses
on clients requiring technical translations, where the
required quality and translation expertise is higher.
On 1 October 2017, the division was restructured,
rebranded and a new management team put in place.
This change helped improve performance and margins
with adjusted operating profit having increased by 23% to
£1.6m (2017: £1.3m). Further improvements are expected
over time through production process efficiencies and
enhancements to its sales team and processes. We
also look forward to seeing the financial benefit of the
establishment of a small operation in the United States
and further cross-selling opportunities from Moravia.
Annual Report 2018Annual Report 2018
Strategic Report
16
Contents
Strategic Report
17
Contents
Strategic Report
(continued)
Risk management
The Group considers a risk management framework
as a vital tool to ensure existing and potential risks to
the business are identified and mitigating actions are
fully considered. The framework covers the extended
business, including the Group’s supply chain, from key
suppliers to end-clients. The CFO is charged with both
identifying the broad market related risks to the Group
and collating specific potential risks from the divisional
Managing Directors for further assessment via the risk
management framework.
Opportunities for the Group are assessed by the CFO
in terms of potential financial benefit and return on
investment, where appropriate.
The risk management framework categorizes potential
risks to the business, first by considering the risk area
and the specific identified risk, before applying an impact
analysis that ranks the significance of the risk with the
probability of the risk occurring to produce a gross risk
score. This is then filtered against the mitigating controls
before identifying any further action that is required to
minimize the potential risk to the business. At the end
of this process a net risk is assessed, and a risk owner
assigned, along with an expected timetable to complete
any identified further action.
The deliverable from this process is an official risk
register which is reviewed and assessed on an
annual basis by the Board. The Group believes that
it has fostered an open and proactive culture to risk
management throughout its divisional structure and
has recently further strengthened this process through
the introduction of a half yearly review of the formal
risk register by the senior management team, with any
updates approved by both the CFO and the CEO.
Currently, the key risks included within the risk register
are as follows: errors in the provision of the Group’s
services, in a mismatch between currencies (especially
between the USD and GBP), in regulatory changes
to patent translation requirements in Europe, in the
emergence of new translation technologies, and in 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 management and staff.
The risk of Brexit on our ability to attract staff from the
European Union remains unknown.
These risks are mitigated as follows:
> Failings in service provision could arise as a result
of human error. RWS was the first language services
provider and the first search company to adopt ISO
certification. The Group also has extensive ISO certified
processes in its Life Sciences and Moravia divisions and
invests in exhaustive and regularly updated procedures
to minimize the risk of error, leading to consistently
high levels of accuracy. In addition, the Group carries
substantial professional indemnity insurance.
> Currency risk is partly mitigated via hedging operations
and matching US dollar denominated debt to US dollar
revenues.
> We have in the past drawn the market’s attention to
the proposed European Union Patent (the Unitary
Patent or UP) and its potential impact upon the Group’s
profits and the uncertainty around the timetable
for its implementation. It remains unclear whether
the UP system will start before the Brexit date of 29
March 2019, with the start date being dependent
on ratification of the UP agreement by the German
authorities. This ratification is being delayed by a
legal appeal to the German courts, claiming the
Unitary Patent is unconstitutional under German law.
If the agreement is not ratified by the Brexit date,
the UK would be outside the UP, further reducing its
benefits to RWS’s clients. If it is ratified prior to the
Brexit date, further discussions would need to take
place to agree whether the UK could remain in the
UP when it is not part of the European Union. When
eventually implemented, the territorial coverage of the
»
»
In February 2017, RWS acquired LUZ, inc, and the
integration of this business with the existing life
sciences businesses to form the united RWS Life
Sciences division was successfully completed in
October 2017.
In November 2017, RWS acquired Moravia, which
included a small life sciences division, with US$6m
of revenue. The integration of this business into
the RWS Life Sciences division was completed in
September 2018.
The framework developed for integrating acquired
businesses is now well established at RWS and the
experience and knowledge gained from the above
integrations will be utilized on any future acquisitions.
> RWS has been successful in recruiting high calibre staff
to support our growth to date. However, competition
for talent in key cities, such as London, is intensifying.
In order to continue to grow our global talent base,
we strive to offer stability of employment, competitive
salaries and an excellent working environment to our
colleagues and, where appropriate, to add locations in
second cities that provide access to a wider talent pool.
Richard Thompson, Chief Executive Officer
10 December 2018
proposed Unitary Patent will not be as comprehensive
as the current, long-established patent application
procedures, and will run in parallel with this system.
It will also have a different litigation process and fee
structure. As such, we believe our major clients will
be cautious in their take-up of this new and unproven
system and will decide upon their patenting strategies
as they observe the Unitary Patent in action, assessing
which of the two systems they prefer for their filings.
As a result of the above, we do not expect the UP to
have any impact on our FY 2019 financial results and a
limited impact in subsequent years.
> The Group has always embraced new translation
technologies, such as Translation Memory (TM), and
used them to good effect in order to maintain and
improve margins, efficiency and competitiveness.
Recognizing the advances in machine translation
technology (MT), we continue to monitor, trial its
use and introduce MT into the business where it
makes commercial sense to do so and where there
is significant additional benefit beyond our existing
TM. Moravia utilizes a comprehensive range of MT
technologies as an integrated part of its services to
its technology clients, and its extensive knowledge of
these technologies is currently being leveraged across
the broader Group. It is clear that the quality of MT will
improve over time and as a leader in language services,
RWS will continue to differentiate itself by focusing on
translation work in critical areas such as intellectual
property and life sciences or where the nuances of
localization are highly valued by major global brands.
> In recent years, RWS has acquired and successfully
integrated several businesses into the Group:
»
In October 2015, RWS acquired Corporate
Translations Inc. (CTi) and subsequently integrated
RWS’s smaller existing life sciences businesses of
PharmaQuest and its Medical Translation Division
into the newly acquired business. This integration
work was successfully completed in September
2016.
Annual Report 2018Annual Report 2018 Chairman’s Governance Overview
18
Contents
Chairman’s Governance
19
Contents
Chairman’s Governance
Overview
Andrew Brode, Chairman
10 December 2018
//
The core values
instilled by our
founders continue
to guide the way we
work and underpin
our success in the
industry.
At RWS, we are
strongly committed to
upholding the values
of good corporate
governance and
accountability to
all of the Group’s
stakeholders including
shareholders, staff,
suppliers and clients.
Our belief
Our company values lie at the
heart of everything we do. We were
established as a small family-run
business in the 1950s and have a
long tradition of respecting and
reinforcing the core values instilled
by our founders, which continue to
guide the way we work and underpin
our success in the industry.
We firmly believe that success should
be pursued without detriment
to others. We are committed to
generating prosperity not only for
shareholders and employees, but
also for the communities in which
we operate, the clients we serve
and the suppliers we engage. Our
values, which are championed by
the Group’s Executive Directors,
and closely monitored by the Board,
are aligned with good corporate
governance to allow for the
continued international expansion
and growth of the business, while
enhancing the interests of all of the
Group’s stakeholders. The Board
understands that upholding good
corporate governance is a significant
factor in achieving this growth,
while at the same time mitigating
risks for the long-term benefit of the
business.
//
The Board is
committed to
providing an
environment and
opportunities
that encourage
and reinforce the
corporate culture of
the Group.
As Chairman, I lead and chair the
Board and have overall responsibility
for corporate governance and
promoting the values of the Group,
both internally to employees
and externally to the broader
stakeholder group. I am centrally
involved in developing strategy and
setting objectives for the Group
and overseeing investor relations
and communication between
the Group and its shareholders.
I am also actively involved in the
identification and evaluation of
potential acquisition targets that fit
within prescribed selective criteria, to
further grow the Group.
Our team
The Board is committed to providing
an environment and opportunities
that encourage and reinforce the
corporate culture of the Group. The
Board is also committed to extending
the values that it promotes, to
include all stakeholder groups.
The Group’s activities are highly
skilled and labour intensive and
therefore highly reliant upon the
skills, dedication and passion of all
of our staff and contractors, who
are expected to meet our clients’
demand for excellent quality and
timely delivery. The values that we
promote include the mutual respect
of peers, commitment to outstanding
quality of work, trust, integrity and
honesty.
We look to employ individuals who
reflect the diversity of the Group’s
communities and reinforce our
ethical values and behaviours. No
discrimination is tolerated, and we
endeavour to give all employees
an excellent working environment,
the latest technology, appropriate
training and development support,
social opportunities and competitive
benefits packages.
The regular dialogues we hold
with staff is important to help us
monitor corporate culture, address
concerns in a timely manner
and explore further initiatives to
make RWS a better place to work.
Dialogue is encouraged via one-to-
one meetings with line managers,
departmental team meetings and
employee briefings. Working closely
with senior management, corporate
culture is regularly discussed at
Board meetings and provides an
opportunity to explore concerns and
assess staff feedback, and where
appropriate, put actions in place.
Our governance model
As an AIM listed company, RWS has
chosen to implement The Quoted
Companies Alliance Corporate
Governance Code (the QCA Code).
The principles and disclosures laid
out by the QCA Code provides a
framework to ensure we have the
appropriate corporate governance
arrangements in place. The Board
considers that RWS does not depart
from any of the principles of the
QCA Code and pages 18-29 include
details of our compliance, which will
be reviewed annually in line with the
requirements of the QCA Code.
Andrew Brode, Chairman
10 December 2018
Annual Report 2018 Board of Directors
20
Contents
Board of Directors
21
Contents
Board of Directors
Chairman
Chief Executive Officer
Chief Financial Officer and
Company Secretary
Senior Independent Non-
Executive Director and
Deputy Chairman
Non-Executive Director
Non-Executive Director
Andrew Brode (78)
Richard Thompson (56)
Desmond Glass (49)
David E Shrimpton (75)
Elisabeth A Lucas (62)
Lara Boro (51)
> CFO and Company Secretary
> Appointed as a Director on 1
> Appointed as a Director on 11
> Appointed as a Director on 20
January 2010
November 2003
September 2017
> Chair of the Audit Committee and
member of the Remuneration
Committee
Committee and member of the
Audit Committee
> Chair of the Remuneration
> Member of the Audit Committee
> Appointed as a Director and
Company Secretary on 6
November 2017
> Previously worked for GAN plc,
the AIM listed internet gaming
software company, where he held
the role of CFO for nine years.
Desmond was instrumental in
preparing the company for its
successful AIM public listing in
November 2013, and subsequently
expanding the company’s
operations and delivery capability
across the United States and
Europe
> Fellow of the Institute of Chartered
Accountants in Ireland
> Appointed as a Director on 11 April
2000
> Member of the Audit Committee
and the Remuneration Committee
> Led the management buy-in
of RWS Group. A substantial
shareholder in the Company
> Non-Executive Chairman of
Learning Technologies Group
plc and GRC plc, both AIM listed
companies. Andrew is also a Non-
Executive Director of a number of
other private companies
> Appointed as CEO on 31 March
2017 having joined RWS on 28
November 2012 as CFO and
Company Secretary. During his
time as CFO and CEO, Richard has
played a pivotal role in RWS’s move
into life sciences translations,
spearheading the acquisitions
of CTi and LUZ, and latterly
localization services with the
acquisition of Moravia
> Previously worked for Actix
International Limited, a global
supplier of software and services
to the telecommunications market,
where he held the position of CFO
for six years
Registered office
Europa House
Chiltern Park
Chiltern Hill
Chalfont St Peter
Buckinghamshire SL9 9FG
Company registration number 03002645
and the Remuneration Committee
> Currently a Group Managing
Director for Informa, the FTSE 100
global B2B media company, where
she heads up the life science, TMT
and transportation businesses
within the Business Intelligence
division
> Non-Executive Director of a
> Joined RWS in 1977, Managing
number of private companies
> During his time with BDO LLP,
David played a significant role in
establishing BDO as a top-ranking
firm through his involvement in
both the Management Committee
and Partnership Council
Director of Translations Division
from 1992 and CEO from 1995 to
2011
> In her role as CEO, Elisabeth led
the business through its successful
initial public offering (IPO) on AIM
and successfully managed the
business post IPO through eight
consecutive years of growth in
sales and profits
New appointment
Tomas Kratochvíl (52)
Non-Executive Director
> Appointed as a Director on 28 March 2018
> Member of the Remuneration Committee
> Former CEO of Moravia, acquired by RWS in November 2017, having held this
position for eight years during which time he led the company to become a
premier provider of localization services
> Long-term member of the CEO Collaborative Forum
Annual Report 2018Annual Report 2018 Corporate Governance Report
22
Contents
Corporate Governance Report
23
Contents
Corporate Governance Report
The Board
The Board recognizes
the importance of, and is
committed to, ensuring
that effective corporate
governance procedures
are in place that are
appropriate for a public
company of RWS’s size
and complexity.
The Board believes that as a
collective, the Directors have
the necessary blend of sector,
financial and public market
skills and experience, along
with an effective balance
of personal qualities and
capabilities.
The Board is committed to
providing specific training
to Directors, be it internally
sourced or via external
advisers, to ensure their
skillset remains relevant for
the Group’s requirements.
development (CPD) requirements;
by participating in business network
groups; through holding Non-
Executive positions with other
public and private companies and
by maintaining active and highly
relevant full-time employment.
The Board is committed to providing
specific training to Directors, be it
internally sourced or via external
advisers, to ensure their skillset
remains relevant for the Group’s
requirements. A summary of the
relevant experience of each of the
Directors can be found on pages
20-21.
Executive roles and responsibilities
The Chairman, Andrew Brode,
leads and chairs the Board. Further
details of the Chairman’s role can be
found in the Chairman’s corporate
governance overview on page 19.
The CEO, Richard Thompson,
provides leadership and
management to the Group and
its senior management team. The
CEO pushes the development
of objectives, strategies and
performance standards whilst also
overseeing and managing key risks
across all divisions of the Group.
The CEO also plays a lead role in
devising and implementing the
Group’s corporate development
strategy and in investor relations to
ensure that communications with the
Group’s shareholders and financial
institutions are maintained.
Board composition
The Board currently comprises the
CEO and CFO as Executive Directors,
the Chairman and four Non-
Executive Directors, following the
appointment of Tomas Kratochvíl as
Non-Executive Director on 28 March
2018. 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 considers that all of
the Non-Executive Directors are
independent in character and
that there are no relationships or
circumstances which are likely to
affect their independent judgement.
The Board notes that Elisabeth
Lucas and Tomas Kratochvíl have
previously held chief executive roles
with RWS and Moravia respectively,
however they believe that their in-
depth knowledge and experience
of working within the Group gives
a unique insight into the Group’s
operations and markets, making
them valued members of the RWS
Board. They also note that Elisabeth
Lucas relinquished her CEO role
seven years ago.
The Board believes that as a
collective, the Directors have the
necessary blend of sector, financial
and public market skills and
experience, along with an effective
balance of personal qualities and
capabilities. Directors keep their
skillset up to date in a number of
ways: through active membership
of professional organizations
and institutes and fulfilment of
associated continuing professional
Board meetings
Eligible
to attend
Attended
Andrew
Brode
Richard
Thompson
Desmond
Glass
David E
Shrimpton
Elisabeth A
Lucas
Lara
Boro
Tomas
Kratochvíl
7
7
7
7
7
7
5
7
7
7
6
7
7
5
Committee meetings: Audit
Eligible
to attend
Attended
Andrew
Brode
David E
Shrimpton
Elisabeth A
Lucas
Lara
Boro
Tomas
Kratochvíl
2
2
2
2
–
2
2
1
2
–
Committee meetings: Remuneration
Eligible
to attend
Attended
Andrew
Brode
David E
Shrimpton
Elisabeth A
Lucas
Lara
Boro
Tomas
Kratochvíl
1
1
1
1
–
1
1
1
1
–
The CFO, Desmond Glass, is
responsible for shaping and
executing the financial strategy
of the Group. In this role he also
supports the Group’s investor
relations programme and corporate
development efforts. Due to the size
of the Group, the CFO also serves
as the Company Secretary and is
charged with ensuring the delivery
of clear and accurate management
information to the Board to allow for
timely deliberation and subsequent
communication of agreed actions.
Board commitments
The Board met seven times in the
year. The Board is tasked with
developing the overall structure and
direction of the business, ensuring
that appropriate delegations
of authority are communicated
throughout the Group, monitoring
Executive Director performance,
reviewing the monthly operational
and financial performance of the
Group and formally approving
the annual budget and audited
financial statements of the Group.
Various members of the Group’s
senior management team are
invited to certain Board meetings to
report on their particular areas of
responsibility.
Each Board meeting is preceded
by a clear agenda and relevant
information is provided to Directors
in advance of the meeting. The
Chairman and the Company
Secretary have responsibility to
ensure that all Directors receive
relevant Board papers in a timely
fashion, so as to facilitate a full and
more effective discussion of matters
during Board meetings.
The Non-Executive Directors are
expected to dedicate not less
than one day per month to fulfil
their duties. This includes, but is
not limited to, preparation and
attendance of Board meetings of the
Company and, where agreed, other
Group companies and the general
meeting of the shareholders of the
Company.
Key Board actions
Key Board actions
during the year:
during the year:
> reviewed and approved
acquisition of Moravia
> appointed new Non-
Executive Director
> published gender pay
gap report
> published modern
slavery statement
> implemented the QCA
Code
> reviewed risk register
The Group believes it has effective
procedures in place to monitor
and deal with potential conflicts of
interest. The Board is aware of the
other commitments and interests of
its Directors, and changes to these
commitments and interests are
reported to and, where appropriate,
agreed by the rest of the Board.
Board performance
An effective Board is critical to the
success of RWS. In order to ensure
that the Board continues to operate
as efficiently as possible, the Board
has committed to a formal annual
performance assessment for the
CEO (led by the Chairman) and CFO
(led by the CEO) this year, which
was introduced with effect from the
start of FY 2019. This assessment
process will extend to the Non-
Executive Directors later in the
year. Factors considered in the
evaluation process includes, but is
not limited to, commitment to the
long-term development of the Group;
attendance at formal meetings;
meaningful and varied contributions
at Board meetings; personal
interaction and relationship building,
with the Executive Directors, other
professional advisers to the Group
and the senior management team.
Annual Report 2018Annual Report 2018 Corporate Governance Report
24
Contents
Audit Committee Report
25
Contents
Corporate Governance Report
(continued)
Audit Committee Report
Appointment and re-election
of Directors
The Company’s Annual General
Meeting (AGM) will be held in London
on 13 February 2019.
Notwithstanding that neither the
Company’s Articles of Association
nor the QCA Guidelines (the
corporate governance code to which
the Company adheres) require
them to do so, all of the Directors
are standing for re-election as has
increasingly become the market
practice and standard of good
corporate governance adopted by
companies of equivalent standing to
the Company.
The Company’s Articles of
Association provide that any new
Director appointed by the Board
during the year, having not been
previously elected by shareholders,
may hold office only until the next
AGM, when that Director must retire
and stand for election as a Director
at such meeting.
Tomas Kratochvíl has joined the
Board since the 2018 AGM and
will accordingly seek election by
shareholders at the AGM.
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 each
division, of actual performance
compared to budget and previous
year; annual budget setting; and a
defined organizational 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, the Board assesses
the risks facing the business and
approves the steps and timetable
senior management has established
to mitigate those risks.
External advisors
During the year, the Board
engaged Deloitte to review the
long-term incentive programme
for senior management, including
remuneration and share options, and
to facilitate the introduction of a Save
as you Earn (SAYE) scheme for staff.
The members of the Audit Committee are
David Shrimpton (Committee Chair), Lara
Boro, Elisabeth Lucas and Andrew Brode.
In addition, the Committee has oversight of the external
audit process and reviews its effectiveness and approves
any non-audit services provided.
The members, with the exception of Andrew
Brode, our Chairman, are Non-Executive Directors.
The Board is satisfied that the Committee Chair,
David Shrimpton, has recent and relevant financial
experience. He is a Chartered Accountant and was
a member of both the Management Committee and
Partnership Council at BDO LLP. The Committee’s
other members have all played an active role at
Committee meetings held throughout the year. Andrew
Brode is the Group’s Chairman and a substantial
shareholder in the ordinary shares of the Company.
Although not a member of the Audit Committee, the
CFO is invited to attend meetings. The Committee has
engaged PricewaterhouseCoopers LLP (PwC) to act as
external auditors and they are also invited to attend
Committee meetings, unless they have a conflict of
interest. During the year, the Committee met twice
and the members attendance record at Committee
meetings during the financial year is set out on page 23.
Responsibilities
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
financial statements
> reviewing the effectiveness of the Group’s
financial and internal controls
> any significant concerns of the external auditor
about the conduct, results or overall outcome of
the annual audit of the Group
> any matters that may significantly affect the
independence of the external auditor
Significant financial judgements
The Audit Committee considered the following significant
issues regarding the financial statements, and having
done so, were satisfied that they are appropriately stated:
> The acquisition accounting for Moravia, including the
valuation of goodwill and intangible assets. Fair value
adjustments associated with the acquisition accounting
is a judgemental area and inherently complex.
> Impairment of goodwill and intangibles. There is a
significant Group goodwill balance which is required
to be assessed for impairment through a value in use
calculation. This requires judgement; operating cash
flows for each cash generating unit (CGU) are to be
estimated and discounted at an appropriate discount
rate that reflects both market assessments of the time
value of money and the risks specific to the CGU.
> Foreign exchange. The acquisition of Moravia
increased the Group’s exposure to movements in
foreign exchange rates and increased the complexity
of the accounting for foreign exchange transactions in
terms of the application of hedge accounting, both at
subsidiary and Group level.
External audit
The external auditors, PwC, were first appointed
in the financial year to 30 September 2014. The fee
to PwC for the financial year to 30 September 2018
is £335,000. The Audit Committee undertakes a
comprehensive review of the quality, effectiveness, value
and independence of the audit provided by PwC each
year, seeking the views of the wider Board, together
with relevant members of the Executive Committee.
On behalf of the Board
David Shrimpton
10 December 2018
Annual Report 2018Annual Report 2018 Directors’ Remuneration Report
26
Contents
Directors’ Remuneration Report
27
Contents
Directors’ Remuneration Report
Remuneration Committee
The members of the
Remuneration Committee are
Elisabeth Lucas (Committee
Chair), David Shrimpton, Lara
Boro, Tomas Kratochvíl and
Andrew Brode.
With the exception of Andrew
Brode, the members are Non-
Executive Directors. The Board
believes that Andrew Brode’s
interests are closely aligned with
those of all shareholders and
therefore feel that he plays an
important role as member of the
Remuneration Committee.
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.
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. The
remuneration of the Chairman is a matter for the Remuneration Committee,
excluding Andrew Brode. No Director or Senior Executive is involved in any
discussion or decision about his or her own remuneration. During the year,
the Committee met once, and the members attendance is set out on page
23.
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 and other customary benefits such as holidays and health benefits,
sickness benefit and pension contributions. The performance related annual
bonus does not apply to the Chairman. For Non-Executive Directors there is
only one component, a base fee.
Performance related bonuses are based on a combination of adjusted
profit before tax and personal targets, depending on an individual’s area of
responsibility.
Executive Directors’ September 2018 annual bonus
The maximum bonus opportunity during the 12 months ended 30
September 2018 was capped at 71% of base salary for the CEO and 32% for
the CFO. The metrics and weighting for the year ended 30 September 2018
are as follows:
Maximum
Achieved
CEO
CFO
CEO
CFO
Adjusted profit before tax
50%
16%
39%
14%
Personal objectives
21%
16%
16%
14%
Total as a % of base salary
71%
32%
55%
28%
Share options
On 3 April 2013, the Board approved a share option scheme. The scheme was designed to incentivize Executive
Directors and Senior 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.
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 the Chairman and the 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 Richard Thompson and
Desmond Glass are dated 1 November 2012 and 6 November 2017 respectively. In the event of early termination, the
Chairman’s and 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 2018 was £1,187,000 (2017: £1,153,000). The remuneration
of individual Directors and the pension contributions paid by the Group to their personal pension schemes during the
year were as follows:
Remuneration and
pension contributions
of individual Directors
Salary
or fees
£’000
Bonus
£’000
Taxable
benefits
£’000
2018
Total
£’000
2018 Pension
contributions
£’000
2017
Total
£’000
2017 Pension
contributions
£’000
Andrew Brode
263
–
Desmond Glass
(appointed 6 November 2017)
172
53
Reinhard Ottway
(resigned 31 March 2017)
–
–
Richard Thompson
350
191
Elisabeth Lucas
David Shrimpton
Peter Mountford
(resigned 30 September 2017)
Lara Boro
(appointed 20 September 2017)
50
40
–
40
25
–
–
–
–
–
940
244
3
–
–
–
–
–
–
–
–
3
266
225
–
–
5
_
266
–
233
–
–
3
541
11
523
10
50
40
–
40
25
–
–
–
–
–
50
40
40
1
_
–
–
–
–
–
1,187
16
1,153
13
No profit related bonus would be payable if adjusted profit before tax was
below a profit threshold.
Tomas Kratochvíl
(appointed 28 March 2018)
Annual Report 2018Annual Report 2018 Directors’ Remuneration Report
28
Annual Report 2018
Directors’ Remuneration Report
29
Contents
Contents
Directors’ Remuneration Report
(continued)
Directors’ interests in shares
The interests of the Directors as at 30 September 2018 (including the interests of their families and related trusts), all
of which were beneficial, in the ordinary shares were:
During the year, no Directors exercised any options.
The options granted under both schemes will be exercisable at the mid-market price of 129.2 pence.
The market price of the Company’s share as at 30 September 2018 and the highest and lowest market prices during
the year were as follows:
The interests of the Directors in the ordinary shares
Andrew Brode
Elisabeth Lucas
Richard Thompson
Lara Boro
Ordinary shares
of 1 pence
90,174,060
50,000
13,000
2,600
90,239,660
30 September 2018
Highest Market Price
Lowest Market Price
495.0 pence
569.0 pence
335.5 pence
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.
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.
Transactions with Directors
During the year, there were no material transactions between the Company and the Directors, other than their
emoluments.
Number of shares under option
On behalf of the Board
Approved share
option scheme
At 1
October
2017
Issued
in the
year
Exercised
in the
year
At 30
September
2018
Exercise
price
pence
First date
exercisable
Last date
exercisable
Richard Thompson
23,215
–
–
23,215
129.20
03.04.16
03.04.21
Elisabeth Lucas
10 December 2018
Number of shares under option
Unapproved share
option scheme
At 1
October
2017
Issued
in the
year
Exercised
in the
year
At 30
September
2018
Exercise
price
pence
First date
exercisable
Last date
exercisable
Richard Thompson
1,246,265
–
–
1,246,265
129.20
03.04.15
03.04.21
Annual Report 2018 Directors’ Report
30
Annual Report 2018
Directors’ Report
31
Contents
Contents
Directors’ Report
The Directors present their
annual report together with the
audited consolidated financial
statements for the year ended 30
September 2018.
The key performance
indicators of the Group
are revenues and adjusted
pre-tax profit before
amortization of acquired
intangibles, share option
costs, acquisition costs and
any other significant one-off
or non-cash items.
87%
Advance in Group
revenues to
£306.0m
£61.8 million
Adj PBT
(2017: £43.3m)
7.50 pence
Total dividend
for the year
(2017: 6.50 pence)
Business performance and risks
The review of the business,
operations, principal risks and
outlook is dealt with in the Strategic
Review on pages 11 to 17. The key
performance indicators of the Group
are revenues and adjusted pre-
tax profit before amortization of
acquired intangibles, share option
costs, acquisition costs and any other
significant one-off or non-cash items.
Financial results
The financial statements set out the
results of the Group for the year
ended 30 September 2018 which are
shown on page 42.
Group revenues advanced by 87%
to £306.0m (2017: £164.0m) and
pre-tax profit before amortization of
intangibles, share option costs and
acquisition costs was £61.8 million
(2017: £43.3m), a rise of 43%. Profit
before tax is £39.7m (2017: £33.9m).
The total tax expense was £11.4m
(2017: £9.3m), an effective tax rate of
28.7% (2017: 27.5%).
Basic earnings per share was 10.4
pence (2017: 11.0 pence). After
taking account of the amortization
of intangibles, acquisition costs
and the related tax effects of these
adjustments, the adjusted earnings
per share for the Group was 17.4
pence (2017: 14.3 pence).
Dividends
The Directors recommend a final
dividend of 6.00 pence per ordinary
share (see note 8) to be paid on the
22 February 2019 to shareholders
on the register at 25 January 2019,
which, together with the dividend
of 1.50 pence paid in July 2018,
makes a total dividend for the year
of 7.50 pence (2017: 6.50 pence).
The final dividend will be reflected
in the financial statements for the
year ending 30 September 2019. The
proposed total dividend per share is
1.4 times (2017: 1.7 times) covered by
basic earnings per share.
Going concern accounting basis
The Group had cash resources
of £38.2m at 30 September 2018
and an overall net debt of £65.1m
following the funding of the Moravia
acquisition. The Group was able to
generate free cash flow of £35.0m
in the year. The Directors have
considered the recent operating
results, as well as its compliance
with all debt covenants, and have
a reasonable expectation that the
Group has adequate resources to
continue in operation as a going
concern for the next 12 months from
the date these financial statements
were approved.
Financial instruments
Information about the use of
financial instruments by the Group
is given in note 18 to the financial
statements.
Directors
Details of members of the Board at
30 September 2018 are set out on
pages 20-21.
Further information on Board
composition, responsibilities,
commitments and re-election/
election can be found on pages 22-24
in the Corporate Governance Report.
The interests of the Directors in
shares during the year are set
out on page 28 in the Directors’
Remuneration Report.
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.
Corporate governance
Remuneration Committee
Further information about the
Committee and the Company’s
remuneration policy is set out on
pages 26 to 29 in the Directors’
Remuneration Report.
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 realizing
potential.
Employee involvement
The Company’s policy is to consult
and discuss with employees 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 age, sex,
race or religion. Group Companies
endeavour to provide equal
opportunities in recruiting, training,
promoting and developing the
careers of all employees.
Annual Report 2018 Directors’ Report
32
Annual Report 2018
Directors’ Report
33
Contents
Contents
Directors’ Report
(continued)
Substantial shareholdings
At 23 November 2018, the following
were substantial shareholders:
Substantial shareholders
Andrew Brode
(Director)
Liontrust Asset
Management
Aberdeen Standard
Investments
Octopus
Investment
Canaccord
Genuity
Investec Wealth and
Investment
% holding
33.0
11.8
7.8
6.4
5.5
3.1
Authority to allot
Under section 549 of the 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 13 February 2019
AGM which renews, for the period
ending 13 May 2020, or, if earlier, the
date of the 2020 AGM, 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 £911,811,
representing approximately one third
of the share capital of the Company
in issue at 10 December 2018.
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 13 February
2019 AGM which renews, for the
period ending on 13 May 2020 or, if
earlier, the date of the 2020 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
aware of that information. As far as
each of the Directors is aware, the
auditors have been provided with all
relevant information.
PwC has expressed its willingness to
continue in office and a resolution to
reappoint them will be proposed at
the 13 February 2019 AGM.
(b) otherwise allot shares of the
Company, or sell treasury shares for
cash, up to an aggregate nominal
value of £136,772 (representing
in accordance with institutional
investor guidelines, approximately
5% of the share capital in issue as
at 10 December 2018). The second
resolution will request a further
authority for the Directors to allot
shares up to an aggregate nominal
value of £136,772, in respect of an
acquisition or capital investment.
Both resolutions will ask for approval,
as if the pre-emption rights of
section 561 of the Act did not apply.
Rule 9 of the city code
Under rule 9 of the city code, where
any person acquires an interest in
shares which carry 30% 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 14
February 2017 AGM which approved,
for a three-year period until the date
of the 2020 AGM, the waiver granted
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.
Statement of disclosure of
information to 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
Annual Report 2018 Statement of Directors’ Responsibilities
34
Annual Report 2018
Statement of Directors’
35
Contents
Statement of Directors’
Responsibilities
The Directors are responsible for preparing the
annual report and the financial statements in
accordance with applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the
Directors have prepared the Group financial statements
in accordance with International Financial Reporting
Standards (IFRSs), as adopted by the European Union,
and Parent Company financial statements in accordance
with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”,
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 Parent Company, and of
the profit or loss of the Group and Parent Company for
that period.
In preparing these financial statements,
the Directors are required to:
> select suitable accounting policies and then apply them
consistently;
> state whether applicable IFRSs, as adopted by the
European Union, have been followed for the Group
financial statements and United Kingdom Accounting
Standards, comprising FRS 101, have been followed for
the Parent Company financial statements, subject to
any material departures disclosed and explained in the
financial statements;
> make judgements and accounting estimates that are
reasonable and prudent; and
The Directors are also responsible for safeguarding the
assets of the Group and Parent Company, and hence for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group and Parent Company’s transactions
and disclose, with reasonable accuracy at any time, the
financial position of the Group and Parent Company,
and enable them to ensure that the financial statements
comply with the Companies Act 2006.
The Directors are responsible for the maintenance
and integrity of the Company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the annual report and
accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group and Parent
Company’s position and performance, business model
and strategy.
On behalf of the Board
> prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
Richard Thompson, Chief Executive Officer
10 December 2018
Annual Report 2018
Independent Auditor’s Report
36
Independent Auditor’s Report
37
Contents
Contents
Independent Auditor’s Report
to the Members of RWS Holdings plc
Report on the audit of the financial statements
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 2018 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 (United
Kingdom Accounting Standards, comprising FRS 101
“Reduced Disclosure Framework”, and applicable law);
and
> the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
We have audited the financial statements, included within
the Annual Report, which comprise: the consolidated
statement of financial position and Parent Company
statement of financial position as at 30 September
2018; the consolidated statement of comprehensive
income, the consolidated statement of cash flows, the
consolidated statement of changes in equity and the
Parent Company statement of changes in equity for
the year then ended; and the notes to the financial
statements, which include a description of the significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable
law. Our responsibilities under ISAs (UK) are further
described in the auditor’s responsibilities for the audit of
the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance
with the ethical requirements that are relevant to our
audit of the financial statements in the UK, which include
the FRC’s Ethical Standard, as applicable to listed entities,
and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our audit approach
Overview
Materiality
Audit
scope
Key audit
matters
> overall group materiality: £3.1m
(2017: £2.15m), based on 5% of
adjusted profit before tax
> overall Parent Company
materiality: £3.2m (2017: £1.13m),
based on 1% of total assets
> we performed audit work over the
complete financial information for
reporting units which accounted
for approximately 90% (2017: 89%)
of the Group’s revenue and 93%
(2017: 92%) of the Group’s profit
before taxation. These reporting
units comprised certain operating
businesses and centralized
functions
> in addition, we conducted specific
audit procedures on certain
balances and transactions in
respect of a number of other
reporting units
> we also performed work on Group-
wide estimates, judgements and
transactions centrally
> revenue recognition
> acquisition accounting for Moravia
The scope of our audit
As part of designing our audit, we determined materiality
and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where
the Directors made subjective judgements, for example
in respect of significant accounting estimates, that
involved making assumptions and considering future
events that are inherently uncertain.
As in all of our audits, we also addressed the risk of
management override of internal controls, including
evaluating whether there was evidence of bias by
the Directors that represented a risk of material
misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditor’s
professional judgement, were of most significance in
the audit of the financial statements of the current
period and include the most significant assessed risks
of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the
efforts of the engagement team. These matters, and any
comments we make on the results of our procedures
thereon, were addressed in the context of our audit
of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters. This is not a complete list of all
risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Revenue recognition
Refer to note 1, accounting policies, for further
information.
RWS provides language, IP and localization services
across a number of divisions. The value of these services
depends on the volume, timing and complexity of the
work required. Revenue is recognized based on the
realizable value of work performed at a point in time and
is recorded as unbilled revenue within accrued income
until such a time that it is performed.
We have considered the risk relating to revenue in two
separate elements; for short, more frequent projects and
for longer, more complex projects.
For the shorter, more frequent projects, revenue is
recognized on the delivery of work. As the timescale of
these projects is shorter, limited judgement is applied to
the proportion of a service delivered. For these projects,
we consider the risk to relate to the existence of revenue.
For longer projects, which are typically larger and less
frequent in nature – for example linguistic validation
- recognition of revenue is based on the realizable
value of work performed at a point in time, which
requires judgement to be applied regarding the stage
of completion. Revenue is recorded as unbilled revenue
within accrued income until it is invoiced. The carrying
value of accrued income at the year-end date drives
revenue recognition and is judgemental as to the stage
of completion. In addition to the existence risk described
above, we also consider whether the value of revenue
recognized has been accurately recorded in the period.
We assessed the recognition of revenue by performing a
number of tests across all revenue:
> Considered the revenue recognition policy and
determined its appropriateness;
> Reviewed significant invoices and credit notes raised
during the year and post year-end;
> Performed substantive testing of revenue transactions
for Moravia, tracing revenue to cash;
> For all other in-scope reporting units, traced revenue
transactions to cash through the use of Computer
Assisted Audit Techniques (CAATs) and investigated
unusual transactions identified;
> Confirmed that the bank reconciliation controls are
operating effectively;
> Tested revenue journals using a combination of data
analysis techniques, inquiry of management and
detailed substantive testing to identify any significant
items that could be indicative of fraud; and
> Tested after date cash collection on accounts
receivable.
In addition, for the longer projects where there is
an additional risk that revenue is not recognized in
line with the stage of completion, we performed the
following:
> Reviewed evidence of the stage of completion of the
project;
> Recalculated the revenue that should have been
recognized based on the stage of the completion; and
> Reviewed the outcome of previous estimations to
determine whether they were accurate.
Annual Report 2018Annual Report 2018 Independent Auditor’s Report
38
Independent Auditor’s Report
39
Contents
Independent Auditor’s Report
to the Members of RWS Holdings plc (continued)
Key audit matter
How our audit addressed the key audit matter
Acquisition accounting for Moravia
To address this risk, we:
> Refer to page 25 (Audit Committee Report), note
22 of the financial statements and note 2 for the
Directors’ disclosures of the related accounting policies,
judgements and estimates for further information.
> The Group acquired Moravia in November 2017 for
a consideration of US$320m. Accounting for the
acquisition required a fair value exercise to assess
the assets and liabilities acquired, including valuing
any separately identifiable intangible assets, with the
residual balance recognized as goodwill. The valuation
of identified intangibles can be a subjective process and
as such was an area of focus for us.
> Management identified US$172m of intangible assets
in respect of Moravia’s client relationships and brand
name. The fair value of these intangible assets was
judgemental as it used valuation techniques that
require management assumptions including client
attrition rates, growth rates for existing client revenues,
forecast profitability levels and an appropriate discount
rate.
> Examined the acquisition agreement and other
documents including due diligence reports;
> Ensured accounting is in accordance with IFRS 3
Business Combinations;
> Performed testing procedures on the acquired opening
balance sheet including management adjustments;
> Tested the fair value adjustments, working with both
management and management’s expert to verify and
challenge key assumptions;
> Utilized our own expert to support the audit of fair
value adjustments;
> Assessed the existence and disclosure in relation to any
potential assets or contingent assets;
> Agreed cash consideration to bank;
> Agreed refinancing and associated issuance to loan
documentation; and
> Agreed equity raise and associated issuance costs to
bank and supporting documentation.
In relation to the intangible assets identified in respect
of Moravia’s client relationships and the brand name, we
performed the following:
> Assessed the completeness and quantum of intangible
assets identified by management against our own
expectations, formed from review of the due diligence
reports prepared by management’s professional
advisors during the acquisition, and disclosures
surrounding the rationale for the transactions.
> Assessed the work performed on the purchase price
allocation by utilizing our in-house specialists to
evaluate management’s valuation of the identified
assets. Specifically, we reviewed the methodology
adopted, compared the assumptions made on attrition
and recoverability with historical patterns in the
business to verify that assumptions were reasonable,
considered the discount rate used and verified the
mathematical accuracy of the calculations; and
> Corroborated the value of intangibles by performing
an overall sense-check of the level of residual goodwill
arising on the transaction, by considering the level
of resulting goodwill as a proportion of the total
consideration paid, as compared to similar transactions
in the market.
We determined that there were no key audit matters
applicable to the Parent Company to communicate in our
report.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account
the structure of the Group and the Parent Company, the
accounting processes and controls, and the industry in
which they operate.
The Group’s operations and reporting process is
structured around five divisions represented by Patent
Translation & Filing, Patent Information, Life Sciences,
Language Solutions and Moravia. The Group financial
statements are a consolidation of multiple reporting
components including both operating businesses and
central functions.
We identified three components that, in our view,
required an audit of their complete financial information
due to their size, being RWS Translations Limited, Life
Sciences and Moravia. Work was performed by the Group
engagement team in respect of RWS Translations Limited
and Life Sciences. Work was performed by component
auditors in respect of the Moravia division for which we
issued formal, written instructions to the component
auditor setting out the work to be performed and
maintained regular communication throughout the audit
cycle. The Group engagement leader and senior member
Contents
of the Group team undertook a visit of the component
and attended the component’s clearance meeting in
person. During the site visit, findings reported were
discussed and the Group team evaluated the sufficiency
of the audit evidence obtained through discussions with,
and review of the work performed by the component
auditor.
This, together with additional procedures performed at
the Group level (including audit procedures over material
head office entities, impairment assessments, acquisition
accounting, intangible assets, financial statement
disclosures, tax, treasury and consolidation adjustments),
gave us the evidence we needed for our opinion on the
financial statements as a whole. Taken together, our audit
work accounted for 90% of the Group’s revenues and 93%
of the Group’s profit before tax.
Materiality
The scope of our audit was influenced by our application
of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative
considerations, helped us to determine the scope of
our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line
items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate, on the
financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole as
follows:
Group
financial statements
Parent Company
financial statements
Overall materiality
£3.1m (2017: £2.15m).
£3.2m (2017: £1.13m).
How we determined it
5% of adjusted profit before tax.
1% of total assets.
Rationale for
benchmark applied
We believe that adjusted profit
before tax is the primary measure
used by the shareholders in
assessing the performance of the
Group, and is a generally accepted
auditing benchmark.
We believe that Total Assets is
the primary measure used by the
shareholders in assessing the
performance of the Parent Company,
and is a generally accepted auditing
benchmark.
For each component in the scope of our Group audit, we
allocated a materiality that is less than our overall Group
materiality. The range of materiality allocated across
components was £2.1m to £2.8m. Certain components
were audited to a local statutory audit materiality that
was also less than our overall Group materiality.
We agreed with the Audit Committee that we would
report to them misstatements identified during our
audit above £150,000 (Group audit) (2017: £75,000) and
£160,000 (Parent Company audit) (2017: £56,300), as well
as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Annual Report 2018Annual Report 2018
Independent Auditor’s Report
40
Independent Auditor’s Report
41
Contents
Contents
Independent Auditor’s Report
to the Members of RWS Holdings plc (continued)
Conclusions relating to going concern
We have nothing to report in respect of the following
matters, in relation to which ISAs (UK) require us to
report to you when:
With respect to the Strategic Report and Directors’
Report, we also considered whether the disclosures
required by the UK Companies Act 2006 have been
included.
> The Directors’ use of the going concern basis of
accounting in the preparation of the financial
statements is not appropriate: or,
> The Directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the Group’s and
Parent Company’s ability to continue to adopt the going
concern basis of accounting for a period of at least 12
months from the date when the financial statements
are authorized for issue.
However, because not all future events and conditions
can be predicted, this statement is not a guarantee as to
the Group’s and Parent Company’s ability to continue as a
going concern.
Reporting on other information
The other information comprises all of the information
in the Annual Report other than the financial statements
and our auditor’s report thereon. The Directors are
responsible for the other information. Our opinion
on the financial statements does not cover the other
information and, accordingly, we do not express an audit
opinion or, except to the extent otherwise explicitly
stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements
or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify
an apparent material inconsistency or material
misstatement, we are required to perform procedures
to conclude whether there is a material misstatement
of the financial statements or a material misstatement
of the other information. If, based on the work we
have performed, we conclude that there is a material
misstatement of this other information, we are required
to report that fact. We have nothing to report based on
these responsibilities.
Based on the responsibilities described above and
our work undertaken in the course of the audit, the
Companies Act 2006 (CA06) and ISAs (UK) require us to
also report certain opinions and matters as described
below (required by ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in
the course of the audit, the information given in the
Strategic Report and Directors’ Report for the year
ended 30 September 2018 is consistent with the financial
statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the Group
and Parent Company and their environment obtained in
the course of the audit, we did not identify any material
misstatements in the Strategic Report and Directors’
Report.
Responsibilities for the financial statements
and the audit
Responsibilities of the Directors
for the financial statements
As explained more fully in the Statement of Directors’
Responsibilities set out on page 34, the Directors
are responsible for the preparation of the financial
statements in accordance with the applicable framework
and for being satisfied that they give a true and fair
view. The Directors are also responsible for such internal
control as they determine is necessary to enable the
preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern,
disclosing as applicable, matters related to going concern
and using the going concern basis of accounting unless
the Directors either intend to liquidate the Group or
the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit
Other required reporting
of the financial statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole are
free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of
assurance but is not a guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the
audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Use of this report
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.
Companies Act 2006 exception reporting
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
> certain disclosures of Directors’ remuneration specified
by law are not made; 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.
Nigel Reynolds (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
10 December 2018
Annual Report 2018Annual Report 2018
COMPREHENSIVE INCOME
42
FINANCIAL POSITION
43
Contents
Contents
Consolidated Statement of
COMPREHENSIVE INCOME
for the year ended 30 September 2018
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Analysed as:
Operating profit before charging:
Amortization of acquired intangibles
Acquisition costs
Operating profit
Finance income
Finance costs
Profit before tax
Taxation
Profit for the year
Other comprehensive income/(expense)1
Gain/(loss) on retranslation of foreign operations
Gain on cash flow hedges
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
22
6
6
7
9
9
2018
£’000
306,044
(187,211)
118,833
(74,702)
44,131
66,310
(14,591)
(7,588)
44,131
69
(4,541)
39,659
(11,402)
28,257
3,526
408
3,934
32,191
10.4
10.4
2017
£’000
164,040
(92,269)
71,771
(37,790)
33,981
43,405
(6,574)
(2,850)
33,981
973
(1,088)
33,866
(9,306)
24,560
(4,702)
-
(4,702)
19,858
11.0
10.9
1Other comprehensive income includes only items that will be subsequently reclassified to profit before tax when
specific conditions are met.
The notes on pages 46 to 75 form part of these financial statements.
Consolidated Statement of
FINANCIAL POSITION
at 30 September 2018
Registered company 03002645
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
Loan
Trade and other payables
Income tax payable
Provisions
Non-current liabilities
Loan
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
Hedge reserve
Retained earnings
Total equity
Note
2018
£’000
2017
£’000
10
11
12
13
14
18
21
3
15
16
17
15
16
17
13
3
19
233,236
172,517
21,961
2,081
429,795
72,656
1,014
38,155
111,825
541,620
24,311
48,251
4,074
85
76,721
78,958
-
645
30,017
109,620
186,341
355,279
2,735
51,549
384
(8,483)
8,941
408
299,745
355,279
101,108
48,787
18,147
1,475
169,517
41,682
281
20,064
62,027
231,544
8,955
27,689
2,748
82
39,474
31,343
30
297
1,515
33,185
72,659
158,885
2,293
50,718
526
(8,483)
5,415
-
108,416
158,885
The notes on pages 46 to 75 form part of these financial statements.
The financial statements on pages 42 to 75 were approved by the Board of Directors and authorized for issue on 10
December 2018 and were signed on its behalf by:
Andrew Brode
Director
Annual Report 2018Annual Report 2018 CHANGES IN EQUITY
44
CASH FLOWS
45
Contents
Contents
Consolidated Statement of
CHANGES IN EQUITY
for the year ended 30 September 2018
At 1 October 2016
Profit for the year
Currency translation differences
Total comprehensive income for the year
Issues of shares
Deferred tax on unexercised share options
Income tax on unexercised share options
Dividends
Exercise of share options
Share capital
£’000
Share
premium
account
£’000
Other
reserves
(see below)
£’000
2,157
8,947
2,509
-
-
-
136
-
-
-
-
-
-
-
41,771
-
-
-
-
-
(4,702)
(4,702)
-
-
-
-
(349)
Retained
earnings
£’000
95,087
24,560
-
24,560
-
394
598
(12,572)
349
Total attributable
to owners of
Parent
£’000
108,700
24,560
(4,702)
19,858
41,907
394
598
(12,572)
-
At 30 September 2017
2,293
50,718
(2,542)
108,416
158,885
Profit for the year
Gain on cash flow hedges
Gain on retranslation of foreign operations
Total comprehensive income for the year
Issue of shares
Share issue costs
Deferred tax on unexercised share options
Income tax on unexercised share options
Dividends
Exercise of share options
-
-
-
-
442
-
-
-
-
-
-
-
-
-
831
-
-
-
-
-
-
408
3,526
3,934
-
-
-
-
-
(142)
28,257
-
-
28,257
184,565
(3,631)
150
153
(18,307)
142
28,257
408
3,526
32,191
185,838
(3,631)
150
153
(18,307)
-
At 30 September 2018
2,735
51,549
1,250
299,745
355,279
Other reserves
At 1 October 2016
Other comprehensive loss for the year
Exercise of share options
At 30 September 2017
Other comprehensive income for the year
Exercise of share options
At 30 September 2018
Share-based
payment reserve
£’000
Reverse
acquisition
reserve
£’000
875
(8,483)
-
(349)
-
-
526
(8,483)
-
(142)
-
-
384
(8,483)
Hedge
reserve
£’000
-
-
-
408
-
408
Foreign
currency
reserve
£’000
10,117
(4,702)
-
Total other
reserves
£’000
2,509
(4,702)
(349)
5,415
(2,542)
3,526
-
8,941
3,934
(142)
1,250
Consolidated Statement of
CASH FLOWS
for the year ended 30 September 2018
Cash flows from operating activities
Profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Amortization of intangible assets
Finance income
Finance expense
Operating cash flow before movements in working capital and provisions
Increase in trade and other receivables
(Decrease)/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 paid
Interest received
Acquisition of subsidiary, net of cash acquired
Purchases of property, plant and equipment
Purchases of intangibles (computer software)
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowing
Repayment of borrowing
Proceeds from the issue of share capital
Dividends paid
Net cash inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Exchange gains/(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 paid
Income tax paid
Purchases of property, plant and equipment
Purchases of intangibles (computer software)
Free cash flow
Note
12
11
6
6
22
12
11
8
21
2018
£’000
39,659
2,786
16,617
(69)
4,541
63,534
(6,488)
(570)
56,476
(12,848)
43,628
(3,521)
69
(242,311)
(1,872)
(3,320)
(250,955)
118,591
(58,140)
182,207
(18,307)
224,351
17,024
20,064
1,067
38,155
56,476
(3,452)
(12,848)
(1,872)
(3,320)
34,984
2017
£’000
33,866
1,171
6,709
(973)
1,088
41,861
(8,019)
4,244
38,086
(9,687)
28,399
(1,009)
11
(74,834)
(1,495)
(728)
(78,055)
21,000
(8,159)
41,907
(12,572)
42,176
(7,480)
27,910
(366)
20,064
38,086
(998)
(9,687)
(1,495)
(728)
25,178
The Directors consider that the free cash flow analysis above indicates the cash generated from normal activities
excluding acquisitions, dividends paid and the proceeds from the issue of share capital.
The notes on pages 46 to 75 form part of these financial statements.
The notes on pages 46 to 75 form part of these financial statements.
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
46
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
47
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
> IFRS 9 “Financial Instruments” – This standard is first
Basis of accounting and preparation
of financial statements
RWS Holdings plc (the Company) is a public limited
company incorporated and domiciled in England and
Wales whose shares are publicly traded on AIM, the
London Stock Exchange regulated market.
The consolidated financial statements consolidate those
of the 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 (IFRS) as adopted by the EU, IFRIC
interpretations and Companies Act 2006 applicable to
Companies reporting under IFRS.
The consolidated financial statements have been
prepared under the historical cost convention as
modified, where applicable, by the revaluation of financial
assets and financial liabilities at fair value through the
Statement of Comprehensive Income.
The principal accounting policies adopted in the
preparation of the consolidated financial statements
are set out below. The policies have been consistently
applied to both years presented, unless otherwise stated.
The Company has elected to prepare the Company
financial statements in accordance with FRS 101. These
are presented on pages 76 to 85 and the accounting
policies in respect of the Company are set out on page 78
to 79.
Impact of forthcoming changes in accounting policies
The impact on the Group’s financial statements of the
future adoption of new standard interpretations and
amendments is still under review.
The relevant amendments to the Group are:
> IFRS 15 “Revenue from contracts with customers”
– This standard is first applicable to the Group’s 30
September 2019 financial statements. Based on initial
analysis performed, it is not anticipated that this new
accounting standard will have a material impact on the
way the Group recognizes revenue in its Statement of
Comprehensive Income.
applicable to the Group’s 30 September 2019 financial
statements. Based on initial analysis performed, it is
not anticipated that this new accounting standard will
have a material impact on the Group’s approach to
recognizing its financial assets using the expected credit
loss method.
> IFRS 16 “Leases” – This standard is first applicable to
the Group’s 30 September 2020 financial statements.
The Group leases a number of its office locations
and accounts for these as operating leases. Under
this new standard, this will no longer be permitted,
and therefore these office leases will be required to
be accounted for as finance leases, resulting in the
recognition of a lease asset and lease liability. See Note
25 for the Group’s operating lease commitments as at
30 September 2018.
The Group is continuing its assessment of the impact
of these new accounting standards. There were no
other new IFRSs or IFRIC interpretations that are not yet
effective that are anticipated to have a material impact
on the Group.
Basis of consolidation
The consolidated financial statements comprise the
financial statements of the Company and subsidiaries
controlled by the Company, drawn up to 30 September
2018. 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.
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. Costs
directly attributable to business combinations are
expensed. The cost of a business combination is allocated
at the acquisition date by recognizing 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. 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.
Goodwill and other intangible assets
Intangible assets are stated at cost less accumulated
amortization and any accumulated impairment losses.
Where contracts are partially completed, the revenue
recognized is based on the work performed to date.
Subscription revenue is recognized 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. Revenue from linguistic validation
projects is recognized over the life of the project.
Accrued income represents the full receivable value
of work performed to date, less the amount already
invoiced.
Foreign currencies
The functional currency of the Group is Pounds Sterling
and overseas operations 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.
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 recognized in the Foreign Currency Reserve
in the Consolidated Statement of Financial Position.
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. The
assets and liabilities of the segments reflect the assets
and liabilities of the underlying companies involved.
Goodwill arising on acquisitions is capitalized 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, excluding goodwill, 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, subject to meeting the definition
under IAS 38 “Intangible assets”. 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 as follows:
Trade names
Clinician database
Technology
Non-compete clauses
Trademarks
Client relationships
Order book
Five to eight years
10 years
Five years
Five years
Five years
Seven to 20 years
One year
Acquired computer software licences are capitalized 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
which range from one to three years.
The Group has chosen to capitalize some internally
generated software projects. These capitalized
development costs are being recorded as intangible
assets, subject to the conditions of IAS 38 being met,
and amortized from the point at which they are available
for use. These projects are being amortized using the
straight line method over their estimated useful lives of
up to 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, discounts and third-party
licences and after eliminating inter-company sales.
Revenue, other than subscription, commission and
linguistic validation project income, is recognized as a
translation, filing, search or localization project and is
fulfilled in accordance with agreed client instructions.
Annual Report 2018Annual Report 2018
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
48
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Property, plant and equipment
Property, plant and equipment are stated at 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 depreciates the cost of each
item of property, plant and equipment (less its estimated
residual value) using the straight line method over their
estimated useful lives as follows:
Freehold land
Buildings
Nil
2%
Leasehold land, buildings and improvements
the lease term
Furniture and equipment
Motor vehicles
10% to 33%
16.67%
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 recognized 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 recognized in the Statement of
Comprehensive Income.
Derivative financial instruments and hedging
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 the carrying value are also
recognized in the Statement of Comprehensive Income.
When a derivative is designated as a cash flow hedging
instrument, the effective portion of the changes in
fair value of the derivative is recognized in Other
Comprehensive Income and accumulated in the hedge
reserve in equity. Any ineffective portion of the changes
in fair value of the derivative is recognized immediately in
profit or loss.
The amount accumulated in equity is retained in Other
Comprehensive Income and reclassified to profit or loss
in the same period or periods during which the hedged
forecast cash flows affect profit or loss, or the hedged
items affect profit or loss.
If the forecast transaction is no longer expected to
occur; the hedge no longer meets the criteria for hedge
accounting; the hedging instrument expires or is sold,
terminated or exercised, or the designation is revoked,
then hedge accounting is discontinued. If the forecast
transaction is no longer expected to occur, then the
amount accumulated in the hedge reserve is reclassified
to profit or loss.
The Group hedges the net investment in certain
foreign operations by borrowing in the currency of the
operations’ net assets. Any gain or loss on the hedging
instrument relating to the effective portion of the hedge
is recognized in Other Comprehensive Income. Gains
and losses accumulated in equity are included in the
Consolidated Statement of Comprehensive Income when
the foreign operation is partially disposed of or sold.
Trade and other receivables
Trade and other receivables represent amounts due from
clients 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.
Taxation
The tax expense represents the sum of the tax currently
payable and deferred tax. Tax is recognized in the
Statement of Comprehensive Income, except to the
extent that it relates to items recognized directly in
equity, in which case it is recognized 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.
Contents
Loans
Loans are recognized initially at fair value, less directly
attributable transaction costs. Subsequent to initial
recognition, loans are stated at amortized cost using the
effective interest method.
Share-based payments
The Group and Parent 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 share options. These equity-settled share-based
transactions are measured as the fair value of the
share option at the grant date. Details regarding the
determination of the fair value of these share options can
be seen in note 20.
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 recognized 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 recognized 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.
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
49
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 recognized for all taxable temporary
differences and deferred tax assets are recognized to
the extent that it is probable that taxable profits will be
available against which deductible temporary differences
can be utilized. Deferred tax is calculated using tax rates
that are expected to apply in the period when the liability
is settled, or the asset realized, 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 recognized 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
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 recognized 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 recognized 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
Equity issued by the Company is recorded as the
proceeds received net of direct issue costs.
Annual Report 2018Annual Report 2018
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
50
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
51
Contents
Contents
Acquisition accounting
The Group acquired Moravia on 3 November 2017
for US$320m. Accounting for acquisitions requires a
fair value exercise to assess the assets and liabilities
acquired, including any separately identifiable intangible
assets, and associated deferred taxes.
Useful economic lives of intangible assets
The useful economic lives of intangible assets, and
in particular the useful economic lives of client
relationships, are inherently uncertain, which would
change should the client relationship end.
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. CRITICAL JUDGEMENTS AND ACCOUNTING ESTIMATES
IN APPLYING THE GROUP’S ACCOUNTING POLICIES
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.
These estimates and judgements are based on historical
experience and other factors, including expectations
of future events that are believed to be reasonable
under the circumstances. They are reviewed on an
ongoing basis. Revisions to estimates are recognized
prospectively.
A. Judgements
One critical judgement was required to be made by the
Directors in these financial statements.
Application of hedge accounting
Judgement is required prior to entering into a hedging
transaction to determine whether this hedging
transaction should be hedge accounted for under IFRS as
adopted for use by the EU.
B. 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 within the year
ending 30 September 2019.
Impairment of goodwill and intangible assets
Determining whether goodwill and intangible assets are
impaired requires an estimation of the value in use of
the CGUs to which goodwill and intangible assets have
been allocated. The value in use calculation requires the
Group to estimate the future cash flows expected to arise
from the CGUs 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 CGU.
More details on the carrying value of goodwill and
intangible assets is included in notes 10 and 11.
3. SEGMENT INFORMATION
The chief decision maker has been identified as the
Board. The Board reviews the Group’s internal reporting
in order to assess performance and allocate resources.
Following the acquisition of Moravia, the Board divided
the Group into five 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 Statement of
Comprehensive Income.
The five segments are:
> RWS Patent Information: provides both traditional
patent search services and crowdsourcing solutions, all
powered by proprietary, innovative technology.
> RWS Life Sciences: provides a full suite of language
services, including technical translations and linguistic
validation, exclusively for the life sciences industry.
> Moravia: provides localization services including the
adaptation of content, software, websites, applications,
marketing material and audio/video to ensure brand
consistency.
> RWS Language Solutions: provides a full range of
translation and interpreting services to help businesses
communicate globally.
> RWS Patent Translation & Filing: provides the highest-
quality patent translations and a seamless global patent
filing experience.
The unallocated segment relates to corporate overheads,
assets and liabilities.
Segment results for the year
ended 30 September 2018
Patent Translation
& Filing
£’000
Patent
Information
£’000
102,256
30,851
(976)
-
29,875
9,693
3,553
(143)
-
3,410
Revenue
Operating profit/(loss) before charging:
Amortization of acquired intangibles
Acquisition costs
Profit/(loss) from operations
Finance income
Finance expense
Profit before taxation
Taxation
Profit for the year
Life
Sciences
£’000
52,303
14,548
(5,898)
-
8,650
Language
Solutions
£’000
14,922
1,566
(159)
-
1,407
Moravia
£’000
Unallocated
£’000
Group
£’000
126,870
16,980
(7,415)
(966)
8,599
-
(1,188)
-
(6,622)
(7,810)
306,044
66,310
(14,591)
(7,588)
44,131
69
(4,541)
39,659
(11,402)
28,257
Segment results for the year
ended 30 September 2017
Patent Translation
& Filing
£’000
Patent
Information
£’000
97,766
26,949
(1,066)
-
25,883
7,700
4,100
(143)
-
3,957
Revenue
Operating profit/(loss) before charging:
Amortization of acquired intangibles
Acquisition costs
Profit/(loss) from operations
Finance income
Finance expense
Profit before taxation
Taxation
Profit for the year
Life
Sciences
£’000
45,347
11,986
(4,994)
-
6,992
Language
Solutions
£’000
13,227
1,280
(371)
-
909
Moravia
£’000
Unallocated
£’000
Group
£’000
-
-
-
-
-
-
(910)
-
(2,850)
(3,760)
164,040
43,405
(6,574)
(2,850)
33,981
973
(1,088)
33,866
(9,306)
24,560
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
52
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
53
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Segment assets and liabilities
at 30 September 2018
Total assets
Total liabilities
Capital expenditure
Depreciation
Amortization
Patent Translation
& Filing
£’000
Patent
Information
£’000
Life
Sciences
£’000
Language
Solutions
£’000
Moravia
£’000
Unallocated
£’000
Group
£’000
75,066
14,632
12,486
3,999
130,779
49,366
13,519
2,200
300,376
113,979
9,394
2,165
541,620
186,341
189
463
980
10
176
211
205
211
5,902
117
118
181
12,828
1,690
9,298
301
128
45
13,650
2,786
16,617
Segment assets and liabilities
at 30 September 2017
Total assets
Total liabilities
Capital expenditure
Depreciation
Amortization
Patent Translation
& Filing
£’000
Patent
Information
£’000
67,926
14,229
12,557
4,350
Life
Sciences
£’000
131,274
50,344
Language
Solutions
£’000
14,132
3,003
148
462
1,072
914
282
194
1,196
150
4,997
149
93
401
Moravia
£’000
Unallocated
£’000
Group
£’000
-
-
-
-
-
5,655
733
231,544
72,659
83
184
45
2,490
1,171
6,709
Capital expenditure comprises additions to property, plant and equipment and intangible assets, including
additions from acquisitions through business combinations.
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
Cash and cash equivalents
Total unallocated
Assets
2018
£’000
Liabilities
2018
£’000
Assets
2017
£’000
532,226
184,176
225,889
880
321
732
-
7,461
9,394
37
-
1,833
295
-
2,165
695
148
767
-
4,045
5,655
Liabilities
2017
£’000
71,926
42
-
313
378
-
733
541,620
186,341
231,544
72,659
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 bank loans, trade and other payables.
The Group’s operations are based in the UK, Continental Europe, Asia, the United States, Argentina and Australia.
The table below shows turnover by the geographic market in which clients are located.
Turnover by client location
UK
Continental Europe
United States
Rest of the world
2018
£’000
24,298
101,708
163,941
16,097
306,044
2017
£’000
19,924
75,428
52,950
15,738
164,040
No client accounted for more than 12% of Group turnover in the current year (2017: 7%).
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
United States
Rest of the world
Revenue
2018
£’000
112,650
79,209
109,385
4,800
306,044
Segment assets
Capital expenditure
2017
£’000
107,071
5,959
46,238
4,772
164,040
2018
£’000
72,326
287,816
174,723
6,755
541,620
2017
£’000
65,299
7,034
155,294
3,917
231,544
2018
£’000
406
7,443
5,729
72
13,650
2017
£’000
1,107
97
1,207
79
2,490
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
54
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
55
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
4. OPERATING PROFIT
5. STAFF COSTS
Operating profit has been arrived at
after charging/(crediting):
Staff costs (note 5)
Depreciation of property, plant and equipment (note 12)
Amortization of intangible assets (note 11)
Foreign exchange (gains)/losses
Gain on changes in fair values on derivative contracts
Operating lease rentals:
- Property
- Plant and equipment
Auditor’s remuneration
Fees payable to the Company’s auditors for the audit of
the Group’s annual financial statements
- The audit of subsidiaries of the Company
- Taxation compliance services
- Financial due diligence
- Taxation advisory services
- Audit related assurance services
Total fees
2018
£’000
94,191
2,786
16,617
(861)
(272)
2017
£’000
45,153
1,171
6,709
1,461
-
4,058
178
1,497
131
115
220
-
800
61
-
1,196
54
213
29
99
28
46
469
Staff costs (including Directors) comprise:
Wages and salaries
Social security costs
Other pension costs
2018
£’000
2017
£’000
80,422
14,300
1,493
96,215
39,127
4,681
1,345
45,153
The Group operates a defined contribution pension scheme, making payments on behalf of employees to their
personal pension plans. Payments of £1,493,000 (2017: £1,345,000) were made in the year and charged to the
Statement of Comprehensive Income in the period they fell due. At the year-end, there were unpaid amounts included
within other payables totalling £96,000 (2017: £53,000).
During the year, staff costs amounting to £2,024,000 (2017: £nil) were capitalized in respect of internally generated
software projects at Moravia.
Details of Directors’ remuneration and pension contributions are disclosed in the Directors’ Remuneration Report on
pages 26 to 29.
Key management compensation
Short-term employee benefits
Post-employment benefits
2018
£’000
3,567
39
3,606
2017
£’000
3,469
54
3,523
The key management compensation includes the seven (2017: seven) Directors of RWS Holdings plc and the six
(2017: six) members of the Senior Executive Team who are not Directors of RWS Holdings plc.
The monthly average number of people employed by the Group, including
Directors and part-time employees, during the year was:
Production staff
Administrative staff
2018
2,017
354
2,371
2017
704
192
896
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
56
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
57
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6. FINANCE INCOME AND COSTS
7. TAXATION
Finance income
- Returns on short-term deposits
- Movement in the fair value of foreign currency contracts
Finance cost
- Bank interest payable
- Amortized borrowing costs
- Movement in the fair value of foreign currency contracts
Net finance cost
2018
£’000
2017
£’000
69
-
69
11
962
973
(3,947)
(313)
(281)
(4,541)
(1,088)
-
-
(1,088)
(4,472)
(115)
Taxation recognized in the income statement is as follows:
Current tax expense
Tax on profit for the current year
- UK
- Overseas
Adjustments in respect of prior years
Deferred tax
Current year movement
Adjustments in respect of prior years
Total tax expense for the year
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 19.0% (2017: 19.5%)
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
2018
£’000
2017
£’000
6,641
6,275
(261)
12,655
(1,464)
211
11,402
5,825
2,708
(208)
8,325
721
260
9,306
2018
£’000
2017
£’000
39,659
7,535
33,866
6,604
1,716
2,201
(50)
11,402
1,131
1,519
52
9,306
Factors that may affect future tax charges
The standard rate of corporation tax in the UK changed from 20% to 19% with effect from 1 April 2017. The reduction
of the UK Corporation tax rate from 19% to 17% will be effective from 1 April 2020. As a result, the relevant deferred
tax balances have been remeasured.
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
58
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
59
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
8. DIVIDENDS TO SHAREHOLDERS
10. GOODWILL
Final, paid 23 February 2018 (2017: paid 24 February 2017)
Interim, paid 20 July 2018 (2017: paid 21 July 2017)
2018
pence
per share
5.20
1.50
6.70
2018
£’000
14,209
4,098
18,307
2017
pence
per share
4.45
1.30
5.75
2017
£’000
9,602
2,970
12,572
The Directors recommend a final dividend in respect of the financial year ended 30 September 2018 of 6.00 pence
per ordinary share, to be paid on 22 February 2019 to shareholders who are on the register at 25 January 2019. This
dividend is not reflected in these financial statements as it does not represent a liability at 30 September 2018. The
final proposed dividend will reduce shareholders’ funds by an estimated £16.4m.
9. EARNINGS PER ORDINARY SHARE
Cost and net book value
Opening
Additions
Exchange adjustments
At 30 September
2018
£’000
2017
£’000
101,108
128,505
3,623
233,236
61,518
43,401
(3,811)
101,108
During the year, goodwill was tested for impairment. The recoverable amount for each CGU has been determined
from value in use calculations. The key assumptions for the value in use calculations are those regarding discount
rates and growth rates. 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 value in use calculations.
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.
Basic earnings per share is calculated using the Group’s profit after tax and the weighted average number of ordinary
shares in issue during the year, as follows:
Key assumptions for the value in use calculations are 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
2018
2017
271,216,566
1,265,706
272,482,272
223,735,513
1,539,927
225,275,440
Patent Translation & Filing
Patent Information
Life Sciences
Moravia
Language Solutions
Long-term
growth rate
Discount
rate
Revenue
growth
2%
2%
2%
2%
2%
9%
9%
11%
10%
9%
4%
5%
5%
5%
4%
Adjusted earnings per ordinary share is also presented to eliminate the effects of acquired intangibles, share option
costs and acquisition costs. This presentation shows the trend in earnings per ordinary share that is attributable to
the underlying trading activities of the Group.
The reconciliation between the basic and adjusted figures is as follows:
Profit for the year
Adjustments:
Amortization of acquired intangibles
Acquisition costs
Tax effect of adjustments
Adjusted earnings
2018
£’000
2017
£’000
28,257
24,560
14,591
7,588
(3,285)
47,151
6,574
2,850
(1,972)
32,012
2018
Basic
earnings
per share
pence
2017
Basic
earnings
per share
pence
2018
Diluted
earnings
per share
pence
2017
Diluted
earnings
per share
pence
10.4
5.4
2.8
(1.2)
17.4
11.0
2.9
1.3
(0.9)
14.3
10.4
5.3
2.8
(1.2)
17.3
10.9
2.9
1.3
(0.9)
14.2
RWS uses adjusted results as key performance indicators, as the Directors believe that these provide a more
consistent measure of operating performance. Adjusted profit is therefore stated before amortization of acquired
intangibles, acquisition costs and share option costs.
Long-term growth rate is the rate applied to determine the terminal value on year five cash flows. The discount rate
is the pre-tax discount rate. Revenue growth is the average annual increase in revenue over the five-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 a
period of five 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 CGUs. There are no reasonably
possible changes in the key assumptions that could cause the carrying value of the CGUs to exceed their recoverable
amounts.
Based on the result of the value in use calculations undertaken, the Directors conclude that the recoverable amount
of each CGU exceeds its carrying value.
The allocation of goodwill to each CGU is as follows:
Patent Translation & Filing
Patent Information
Life Sciences
Moravia
Language Solutions
At 30 September
2018
£’000
2017
£’000
25,120
8,150
65,891
129,336
4,739
233,236
24,551
7,840
64,021
–
4,696
101,108
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
60
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
61
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
11. INTANGIBLE ASSETS
12. PROPERTY, PLANT AND EQUIPMENT
Trade
names
£’000
Clinician
database
£’000
Technology
£’000
Non-
compete &
trademark
£’000
Client
relationships
& order book
£’000
Software
£’000
Total
£’000
Freehold
land and
buildings
£’000
Leasehold land,
buildings and
improvements
£’000
Furniture and
equipment
£’000
Motor
vehicles
£’000
Cost
At 1 October 2016
Additions
Acquisitions
Disposals
Currency translation
At 30 September 2017
Additions
Acquisitions
Disposals
Currency translation
At 30 September 2018
Accumulated amortization
and impairment
At 1 October 2016
Amortization charge
Disposals
Currency translation
At 30 September 2017
Acquisitions
Amortization charge
Disposals
Currency translation
At 30 September 2018
Net book value
At 1 October 2016
At 30 September 2017
At 30 September 2018
1,124
-
-
-
(34)
1,090
-
8,254
-
87
9,431
129
143
-
(11)
261
-
1,606
-
66
1,933
995
829
7,498
5,244
-
-
-
(157)
5,087
-
-
-
156
5,243
481
536
-
(42)
975
-
506
-
48
1,529
4,763
4,112
3,714
2,459
-
3,071
-
(279)
5,251
-
-
-
162
5,413
1,476
854
-
(87)
2,243
-
1,045
-
107
3,395
983
3,008
2,018
258
-
1,946
-
(126)
2,078
-
-
-
58
2,136
258
223
-
(6)
475
-
361
-
22
858
31,153
-
23,737
-
(2,243)
52,647
-
123,281
-
2,203
178,131
9,636
4,818
-
(283)
14,171
-
11,073
-
659
25,903
611
728
-
(9)
7
1,337
3,320
12,064
(611)
(24)
16,086
448
135
(9)
4
578
8,333
2,026
(611)
(21)
10,305
40,849
728
28,754
(9)
(2,832)
67,490
3,320
143,599
(611)
2,642
216,440
12,428
6,709
(9)
(425)
18,703
8,333
16,617
(611)
881
43,923
-
1,603
1,278
21,517
38,476
152,228
163
759
5,781
28,421
48,787
172,517
Technology, trademarks, trade names, non-compete, clinician database and client relationships are amortized
over periods ranging from five to 20 years. Software is amortized over not more than three years. The order book
intangible identified in valuing the CTi and LUZ acquisitions was amortized over one year. See note 1, accounting
policies, for further details.
Cost
At 1 October 2016
Currency translation
Additions
Acquisitions
Disposals
At 30 September 2017
Currency translation
Additions
Acquisitions
Disposals
At 30 September 2018
Accumulated depreciation
At 1 October 2016
Currency translation
Acquisitions
Depreciation charge
Disposals
At 30 September 2017
Currency translation
Acquisitions
Depreciation charge
Disposals
At 30 September 2018
Net book value
At 1 October 2016
At 30 September 2017
At 30 September 2018
17,010
-
-
-
-
17,010
-
24
-
-
17,034
1,161
-
-
229
-
1,390
-
-
229
-
1,619
15,849
15,620
15,415
583
(4)
3
61
-
643
(4)
109
2,068
(155)
2,661
407
(2)
24
39
-
468
(2)
952
532
(155)
1,795
176
175
866
3,923
(88)
1,470
545
(400)
5,450
18
1,694
10,048
(574)
16,636
2,345
(16)
324
894
(400)
3,147
16
6,445
2,011
(574)
11,045
1,578
2,303
5,591
93
1
22
57
(56)
117
2
45
43
(2)
205
66
1
48
9
(56)
68
1
35
14
(2)
116
27
49
89
Included in freehold land and buildings at 30 September 2018 was freehold land of £5.6m (2017: £5.6m).
Total
£’000
21,609
(91)
1,495
663
(456)
23,220
16
1,872
12,159
(731)
36,536
3,979
(17)
396
1,171
(456)
5,073
15
7,432
2,786
(731)
14,575
17,630
18,147
21,961
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
62
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
63
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
13. DEFERRED TAX
14. TRADE AND OTHER RECEIVABLES
The deferred tax assets and liabilities and the movements during the year, before offset of balances within the
same jurisdiction, are as follows:
Deferred tax assets
At 1 October 2016
Credited to income
Credited to equity
At 30 September 2017
Acquisitions
Charged to income
Credited to equity
At 30 September 2018
Deferred tax liabilities
At 1 October 2016
Credited to income
Credited to equity
At 30 September 2017
Acquisitions
Charged to income
Credited to equity
At 30 September 2018
Share
options
£’000
Depreciation in
excess of capital
allowances
£’000
Other
temporary
differences
£’000
1,044
-
394
1,438
-
(470)
150
1,118
54
49
-
103
-
(18)
-
85
777
(843)
-
(66)
71
873
-
878
Accelerated
capital
allowances
£’000
Other
temporary
differences
£’000
Intangibles
£’000
365
48
-
413
-
143
-
556
961
139
2
1,102
28,938
(1,496)
132
28,676
-
-
-
-
770
485
(470)
785
Total
£’000
1,875
(794)
394
1,475
71
385
150
2,081
Total
£’000
1,326
187
2
1,515
29,708
(868)
(338)
30,017
Deferred tax is calculated using tax rates that are expected to apply in the period when the liability is settled, or the
asset realized, based on tax rates that have been enacted or substantively enacted at the reporting date.
Trade receivables
Less: allowance for doubtful debts
Other receivables
Prepayments and accrued income
At 30 September
2018
£’000
61,332
(230)
61,102
1,706
9,848
72,656
2017
£’000
35,851
(52)
35,799
649
5,234
41,682
Trade receivables are non-interest bearing and generally on terms ranging from 30 to 120 days. Due to their short
maturities, the carrying amount of trade and other receivables approximates to their fair value.
Trade receivables, net of allowances, are held in the following currencies
at the reporting date:
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
Utilized
Provided/(released)
At 30 September
2018
£’000
3,822
13,435
562
42,475
519
289
61,102
2018
£’000
48,113
7,326
3,240
1,408
1,015
61,102
2018
£’000
52
(20)
198
230
2017
£’000
3,016
11,766
520
19,533
744
220
35,799
2017
£’000
22,237
7,731
3,027
1,666
1,138
35,799
2017
£’000
101
(21)
(28)
52
Given the profile of the Group’s clients, no further credit risk has been identified within trade receivables, other than
those balances for which an allowance has been made.
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
64
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
65
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
15. LOANS
16. TRADE AND OTHER PAYABLES
Due in less than one year
Loan
Issue costs
At 30 September
Due in more than one year
Loan
Issue costs
At 30 September
Analysis of net debt
Cash and cash equivalents
Issue costs
Loans due in less than one year
Loans due in more than one year
Total net debt
2018
£’000
24,653
(342)
24,311
80,012
(1,054)
78,958
2017
£’000
8,955
-
8,955
31,343
-
31,343
At 1 October
2017
£’000
20,064
-
(8,955)
(31,343)
(20,234)
Cash flows
£’000
18,091
-
(15,194)
(46,653)
(43,756)
Non-cash
charges
£’000
At 30 September
2018
£’000
-
1,396
(504)
(2,016)
(1,124)
38,155
1,396
(24,653)
(80,012)
(65,114)
On 18 October 2017, the Group entered into a new US$160m debt facility to part fund the acquisition of Moravia US
Holding Co. Inc and Moravia LUX Holding Company Sarl (together “Moravia”), a leading provider of technology-enabled
localization services, for a cash consideration of US$320m, plus working capital and certain other adjustments and
transaction costs. This loan is repayable over five years on a straight line basis, quarterly.
Transaction costs of £1,709,000, directly related to the debt facility, have been capitalized into the loan which will be
amortized over the remaining term of the loan. Amortization of these borrowing costs of £313,000 was recorded
during the year.
Interest is payable quarterly in arrears at a varying rate of interest, being three-month USD LIBOR plus a margin
of between 130 basis points and 250 basis points, based on the Group’s ratio of net debt to adjusted EBITDA (as
determined by bi-annual covenant compliance reporting). During 2018, this margin was 190 basis points.
Due in less than one year
Trade payables
Other tax and social security payable
Other payables
Accruals and deferred income
At 30 September
2018
£’000
2017
£’000
18,906
1,897
1,567
25,881
48,251
9,459
1,343
2,834
14,053
27,689
The carrying amount of trade and other payables approximates to their fair value. Trade payables normally fall due
within 30 to 60 days.
2018
£’000
2017
£’000
Due in more than one year
Rental deposits
-
30
In 2017, the long-term creditor related to rental deposits received in relation to the leasing of a portion of
Randall House.
17. PROVISIONS
Due in less than one year
At 1 October
Utilized
Transferred from provisions due in more than one year
At 30 September
Due in more than one year
At 1 October
Acquired
Charged to the Statement of Comprehensive Income
Transferred to provisions due in less than one year
At 30 September
2018
£’000
82
(82)
85
85
2018
£’000
297
358
75
(85)
645
2017
£’000
79
(79)
82
82
2017
£’000
379
-
-
(82)
297
This includes a long-term dilapidations provision of £434k and monthly ongoing future pension payments to a third-
party of £211k, which will continue for the remainder of the recipient’s life.
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
66
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
67
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
18. 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 and accrued revenue
Foreign exchange derivatives
Cash and cash equivalents
At 30 September
Financial liabilities
Trade and other payables and provisions
Loan
At 30 September
An analysis of the Group’s loan maturity is as follows:
Less than one year
One year to five years
2018
£’000
2017
£’000
69,549
1,014
38,155
108,718
48,981
103,269
152,250
2018
£’000
24,311
78,958
103,269
39,947
281
20,064
60,292
28,098
40,298
68,396
2017
£’000
8,955
31,343
40,298
Interest rate risk
The majority of the Group’s cash balances are held with its principal bankers, earning interest at variable rates of
interest. To the extent the Sterling overdraft is utilized, it attracts an interest rate of base rate plus a margin of 2%.
The Group’s US$160m debt facility is repayable over a period of five years on a straight line basis. Interest is charged
at a rate of three-month USD LIBOR, plus a margin of between 130 basis points and 250 basis points, based on the
Group’s ratio of net debt to adjusted EBITDA (as determined by the bi-annual covenant compliance reporting). During
2018, this margin was 190 basis points.
In the prior year, the Group’s initial loan facility of US$45m was repayable over five years and attracted an interest
rate of 1% above three-month USD LIBOR. Following the acquisition of LUZ, inc on 17 February 2017, the loan was
increased to US$60m with interest payable at a rate of three-month USD LIBOR plus a margin of 200 basis points.
The currency profiles of the Group’s cash and cash equivalents at 30 September 2018 are set out below.
Assets - Cash and cash equivalents
Sterling
US Dollars
Euros
Yen
Swiss Francs
Other
Financial liabilities - Loan
US Dollars
Floating
rate
2018
£’000
2,430
25,871
4,171
1,934
1,452
2,297
38,155
Floating
rate
2017
£’000
3,795
7,438
6,375
1,264
607
585
20,064
103,269
40,298
Trade and other receivables and accrued revenue includes accrued revenue of £6,741,000 (30 September 2017:
£3,499,000). Trade and other payables and provisions includes trade and other payables, tax and social security
balances payable and provisions.
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 CFO.
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. Group borrowings have a number of financial covenants which are tested
bi-annually.
Liquidity risk
In addition to its cash balances, the Group has an overdraft facility of £1.5m, 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.
If interest rates changed by 1%, the 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 A-1 by
Standard & Poor’s, and with a further institution carrying an A+ rating.
Trade receivable exposures are managed locally in the operating units where they arise. The client base tends to be
major blue-chip organizations 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 12% (2017: 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.
The Group does not consider that the value of financial assets, neither past due nor impaired, poses a material risk to
the business, based on the Group’s track record of recovering such debts and its relatively low level of debt write-offs.
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
68
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
69
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Foreign currency risk
Approximately 66% (2017: 43%) of Group external sales in the reporting period were denominated in USD, while a
further 24% were denominated in Euros (2017: 39%). Similarly, the Group’s cost base was 43% in USD (2017: 39%) and
28% in Euros (2017: 28%).
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 with gains and losses on transactions arising from fluctuations in exchange rates being
recognized in the Statement of Comprehensive Income. Where we have a material exposure, the policy is to seek to
mitigate the risk using forward foreign exchange contracts.
Following the acquisition of Moravia during the period, the Group now applies cash flow hedge accounting on foreign
exchange forward contracts taken out by Moravia (since acquisition) to hedge its Czech Koruna operating costs. Any
changes in the fair value of these cash flow hedges have been recognized in a separate hedge reserve in equity and
recycled to the Statement of Comprehensive Income as these costs are settled.
In respect of the cash flow hedges that Moravia had in place pre-acquisition, hedge accounting has not been
continued in the Group and hence all changes in the fair value of these USD to Euro and USD to Czech Koruna foreign
exchange forward contracts are recognized in the Statement of Comprehensive Income.
The Group applies net investment hedge accounting in respect of borrowings associated with the acquisition of
foreign operations, reducing the effect of currency fluctuations in the income statement, by recognizing gains or
losses through Other Comprehensive Income.
Assets and liabilities of Group entities located in Czech Republic, Germany, Switzerland, the United States, Japan,
China, Argentina 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 recognized directly in equity.
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
2018
£’000
7,954
61,207
39
65
754
70,019
Liabilities
2017
£’000
3,287
41,291
2
96
125
44,801
Assets
2018
£’000
15,531
20,057
1,644
1
402
37,635
Assets
2017
£’000
16,274
7,007
1,041
54
165
24,541
Foreign currency sensitivity analysis
The following table details the Group’s sensitivity to a 10% (2017: 10%) increase and decrease in Sterling against the
major currencies listed in the table on page 68. 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 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
2018
£’000
Profit and loss
impact
2017
£’000
689
1,821
146
(6)
2,650
1,181
913
94
(4)
2,184
If the exchange rate on uncovered exposures were to move significantly between the year-end and the 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
Analysis of the Group’s forward contracts’ maturity
Up to three months
Three to six months
Six to 12 months
2018
£’000
1,014
2018
£’000
643
163
208
1,014
2017
£’000
281
2017
£’000
88
74
119
281
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
further equity financings.
Following dividend payments of £18,307,000, closing reserves are £355,279,000. At 30 September 2018, there was
£103,269,000 of external debt finance on the balance sheet, being the balance of the increased US$160m loan taken
out to part fund the acquisition of Moravia. The Group is not subject to externally imposed capital requirements.
In addition, the Group held its own cash and cash equivalents at the year-end of £38,155,000.
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
70
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
71
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
19. SHARE CAPITAL AND RESERVES
20. SHARE-BASED PAYMENT COSTS
2018
Number
2018
£’000
2017
Number
2017
£’000
Authorized
Ordinary shares of 1 pence each (2017: 1 pence)
500,000,000
5,000
500,000,000
5,000
Allotted, called up and fully paid
At beginning of year
Issue of shares
229,361,225
44,182,047
2,293
442
215,764,650
13,596,575
At end of year
273,543,272
2,735
229,361,225
2,157
136
2,293
On 6 April 2013, the Company adopted a 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 vest after a period of three years for the approved scheme
and two years for the unapproved scheme, 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 eight years from the date of grant.
Number of
approved
options
Number of
unapproved
options
Exercise
price (£)
Grant
date
Vesting date
approved
options
Vesting date
unapproved
options
Lapse
date
The increase in share capital was as a result of a placing of 43,529,412 shares on 20 October 2017, sold at 425 pence
per share, as part of the funding of the Moravia acquisition, and also as a result of the exercise of share options
(652,635) by senior management.
Balance at 1 October 2017
Exercised
Balance at 30 September 2018
23,215
-
23,215
2,427,275
(652,635)
1,774,640
1.292
3 April 2013
3 April 2016
3 April 2015
3 April 2021
Reserves
The nature and purpose of each reserve within equity is as follows:
> 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, except where the Group applies a net investment hedge.
> Hedge reserve is the fair value movement on the derivative contracts.
> 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.
There was no charge made in the financial statements (2017: £nil) relating to share options.
652,635 options were exercised during the year (2017: 1,475,265). The weighted average share price at the date of
exercise was 424.6 pence per share.
The fair value of the share options was 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
Unapproved
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
three years at the date of grant.
Note that a 5 for 1 share split took effect from 11 February 2015. This would have the effect of reducing the option
value price in the above table for the approved option scheme and the unapproved scheme to 26.2 pence and 22.2
pence respectively.
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
72
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
73
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
21. CASH AND CASH EQUIVALENTS
22. ACQUISITION
Cash at bank and in hand
Short-term deposits
2018
£’000
35,799
2,356
38,155
2017
£’000
19,227
837
20,064
Moravia
On 3 November 2017, the Group acquired the entire issued share capital of Moravia US Holding Co. Inc and Moravia
LUX Holding Company Sarl (together “Moravia”), a leading provider of technology-enabled localization services, for
a cash consideration of US$320m, plus working capital and certain other adjustments and transaction costs. These
were funded by a £185m (before expenses) cash placing of new ordinary shares and a new US$160m loan, which
refinanced the Group’s existing facility.
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 utilization of the Group’s cash resources.
The fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill are as follows:
Book
values
£’000
Fair value
adjustments
£’000
Fair
values
£’000
Net assets acquired:
Property, plant and equipment
Software
Client relationships
Trade name
Deferred tax liability
Trade and other receivables
Deferred tax asset
Cash and cash equivalents
Trade and other payables
Provisions
Total identifiable net assets
Goodwill
Total consideration
Satisfied by:
Cash
Cash flow:
Total consideration
Cash included in undertaking acquired
Net cash consideration in cash flow statement
4,727
3,731
-
-
(770)
25,155
71
8,326
(21,347)
(358)
122,132
-
250,637
-
-
123,281
8,254
(28,938)
-
-
-
-
-
-
128,505
-
4,727
3,731
123,281
8,254
(29,708)
25,155
71
8,326
(21,347)
(358)
122,132
128,505
250,637
250,637
250,637
(8,326)
242,311
Moravia contributed £126.9m revenue and £13.6m to the Group’s profit after tax for the year between the date of
acquisition and the balance sheet date, excluding the impact of amortization on acquired intangibles. If the acquisition
had been completed on the first day of the financial year, Group revenues for the year would have been £317.5m and
profit after tax for the year £29.5m.
The acquisition brings to the Group a highly successful business with a strong track record of profitable and cash
generative growth, and long-term relationships with some of the largest publicly traded technology companies in the
world. It also creates a further division for the Group and introduces complementary cross-selling opportunities.
Acquisition costs of £7.6m have been charged through the consolidated Statement of Comprehensive Income. Of
these, £966,000 was attributable to Moravia’s internal restructuring costs.
Annual Report 2018Annual Report 2018 Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
74
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
75
Contents
Contents
Notes to the
CONSOLIDATED FINANCIAL STATEMENTS
(continued)
23. RELATED PARTY TRANSACTIONS
25. OPERATING LEASE COMMITMENTS
During the year, in the normal course of business, the Group provided translation services worth £389,000 (2017:
£269,000) to subsidiaries of Learning Technologies Group plc (LTG), a company in which Andrew Brode has a
notifiable interest. An amount of £63,000 due from LTG at 30 September 2018 was paid in full in October 2018
(2017: £37,000).
In addition, IT Governance Limited, a company in which Andrew Brode has a notifiable interest, performed
consultancy services to the Group during the year. The total cost for these services was £15,000 and were fully paid
for in the year.
24. COMMITMENTS AND CONTINGENT LIABILITIES
The Group had no material capital commitments contracted for, but not provided for, in the financial statements
(2017: £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 amounted to £nil (2017: £nil).
The loan of US$160m, taken out with a syndicate of banks to part fund the acquisition of Moravia, has been
guaranteed against the assets of Moravia and other fellow subsidiary undertakings.
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
26. EVENTS SINCE THE REPORTING DATE
2018
£’000
3,916
9,378
9,376
22,670
2017
£’000
1,935
3,421
554
5,910
There were no other significant events that occurred between the balance sheet date and the date of authorization
of these financial statements.
Annual Report 2018Annual Report 2018 PARENT COMPANY FINANCIAL STATEMENTS
76
PARENT COMPANY FINANCIAL STATEMENTS
77
Contents
Contents
Company Statement of Changes in Equity
for the year ended 30 September 2018
At 1 October 2016
Profit for the financial year
Total comprehensive income for the year
Dividends
Issue of shares (net of share issue costs)
Share
capital
£’000
2,157
-
-
-
136
Share
premium
account
£’000
8,947
-
-
-
41,771
Share-based
payment
reserve
£’000
Capital
reserve
£’000
Profit and loss
account
£’000
Total
£’000
1,807
2,030
7,413
22,354
-
-
-
-
-
-
-
-
18,998
18,998
(12,572)
-
18,998
18,998
(12,572)
41,907
Balance at 30 September 2017
2,293
50,718
1,807
2,030
13,839
70,687
Profit for the financial year
Total comprehensive income for the year
Dividends
Issue of shares
Share issue costs
Exercise of share options
-
-
-
442
-
-
-
-
-
831
-
-
-
-
-
-
-
(1,423)
-
-
-
-
-
-
26,524
26,524
(18,307)
184,565
(3,631)
1,423
26,524
26,524
(18,307)
185,838
(3,631)
-
Balance at 30 September 2018
2,735
51,549
384
2,030
204,413
261,111
PARENT COMPANY FINANCIAL STATEMENTS
The following Parent Company financial statements are prepared under FRS 101 and relate to the Company and not
to the Group.
Company Statement of Financial Position at 30 September 2018
Registered Company 03002645
Fixed assets
Investments
Current assets
Debtors
Foreign exchange derivatives
Cash at bank and in hand
Total assets
Current liabilities
Loan
Trade and other payables
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Loan
Provisions
Net assets
Capital and reserves
Share capital
Share premium account
Share-based payment reserve
Capital reserve
Profit and loss account
Total shareholders’ funds
Note
7
8
12
9
10
9
11
13
2018
£’000
2017
£’000
83,315
83,315
228,657
-
12,410
241,067
324,382
14,371
2,051
16,422
83,315
83,315
14,163
281
13,629
28,073
111,388
8,955
361
9,316
224,645
307,960
18,757
102,072
46,812
37
46,849
31,343
42
31,385
261,111
70,687
2,735
51,549
384
2,030
204,413
261,111
2,293
50,718
1,807
2,030
13,839
70,687
Statement of Comprehensive Income: profit after taxation
26,524
18,998
The financial statements on pages 76 to 85 were approved by the Board of Directors and authorized for issue on 10
December 2018 and were signed on its behalf by:
Andrew Brode
Director
Annual Report 2018Annual Report 2018 Notes to the
PARENT COMPANY FINANCIAL STATEMENTS
78
Notes to the
PARENT COMPANY FINANCIAL STATEMENTS
79
Contents
Contents
Notes to the
PARENT COMPANY FINANCIAL STATEMENTS
1. GENERAL INFORMATION
> the following paragraphs of IAS 1, “Presentation
RWS Holdings plc is the holding company of a number
of subsidiaries which provide patent translations,
intellectual property support services, high-level
technical and commercial translations, localization and
linguistic validation services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the
preparation of these financial statements are set out
below. These policies have been consistently applied to
all the years presented, unless otherwise stated.
Basis of preparation
The financial statements of RWS Holdings plc have
been prepared in accordance with Financial Reporting
Standard 101, “Reduced Disclosure Framework” (FRS 101).
The financial statements have been prepared under the
historical cost convention and in accordance with the
Companies Act 2006.
The preparation of financial statements in conformity
with FRS 101 requires the use of certain critical
accounting estimates. It also requires management to
exercise its judgement in the process of applying the
Company’s accounting policies.
The following exemptions from the requirements of IFRS
have been applied in the preparation of these financial
statements, in accordance with FRS 101:
> paragraphs 45(b) and 46 to 52 of IFRS 2, “Share-based
payment” (details of the number and weighted-average
exercise prices of share options and how the fair value
of goods or services received was determined)
> IFRS 7, “Financial Instruments: Disclosures”
> paragraphs 91 to 99 of IFRS 13, “Fair value
measurement” (disclosure of valuation techniques and
inputs used for fair value measurement of assets and
liabilities)
> paragraph 38 of IAS 1, “Presentation of financial
statements” comparative information requirements in
respect of:
i. Paragraph 79(a) (iv) of IAS 1;
ii. Paragraph 73(e) of IAS 16 “Property,
plant and equipment”; and
iii. Paragraph 118(e) of IAS 38 “Intangible
assets” (reconciliations between the
carrying amount at the beginning and
end of the period).
of financial statements”: 10(d), (statement of cash
flows), 16 (statement of compliance with all IFRS), 38A
(requirement for minimum of two primary statements,
including cash flow statements), 38B-D (additional
comparative information), 111 (cash flow statement
information), and 134-136 (capital management
disclosures)
> IAS 7, “Statement of cash flows”
> paragraph 30 and 31 of IAS 8 “Accounting policies,
changes in accounting estimates and errors”
(requirement for the disclosure of information when an
entity has not applied a new IFRS that has been issued
but is not yet effective)
> paragraph 17 of IAS 24, “Related party disclosures” (key
management compensation)
> the requirements in IAS 24, “Related party disclosures”
to disclose related party transactions entered into
between two or more members of a Group
Going concern
The Company meets its day-to-day working capital
requirements through its cash reserves and borrowings.
After making enquiries, the Directors have a reasonable
expectation that the Company has adequate resources to
continue in operational existence for the next 12 months.
The Company therefore continues to adopt the going
concern basis in preparing its financial statements.
Derivative financial instruments
and hedging activities
The Company has not applied hedge accounting and all
derivatives are measured at fair value through profit and
loss.
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 Income Statement 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.
These estimates and judgements are based on historical
experience and other factors, including expectations
of future events that are believed to be reasonable
under the circumstances. They are reviewed on an
ongoing basis, but the future actual experience may vary
materially from management’s expectation.
No critical judgements were required to be made by the
Directors in these financial statements.
Key sources of estimation uncertainty
No estimates and assumptions are considered to have
a risk of causing a material adjustment to the carrying
amounts of assets and liabilities in the Parent Company
financial statements.
4. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into forward foreign currency
contracts to mitigate the exchange rate risk for certain
foreign currency receivables. At 30 September 2018,
there were no outstanding contracts (2017: 12 months) at
the year-end.
5. OPERATING PROFIT
The Company has taken advantage of Section 408
of the Companies Act 2006, and has not included its
own income statement in these financial statements.
The Company profit after tax for the year ended 30
September 2018 under FRS 101 was £26,524,000 (2017:
£18,998,000).
Audit fees payable in relation to the audit of the financial
statements of the Company are £15k (2017: £15k). Fees
paid to PwC 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.
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 payment
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 20 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
Company revises its estimate of the number of options
expected to vest as a result of the effect of non-market-
based vesting conditions. The impact of the revision of
the original estimates, if any, is recognized in the Income
Statement, 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 recognized as an increase in the investment in that
subsidiary.
3. CRITICAL JUDGEMENTS AND ACCOUNTING ESTIMATES
IN APPLYING THE COMPANY’S ACCOUNTING POLICIES
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.
Annual Report 2018Annual Report 2018
Notes to the
PARENT COMPANY FINANCIAL STATEMENTS
80
Notes to the
PARENT COMPANY FINANCIAL STATEMENTS
81
Contents
Contents
Notes to the
PARENT COMPANY FINANCIAL STATEMENTS
(continued)
6. DIRECTORS AND EMPLOYEES
7. INVESTMENTS
There were no employees (2017: 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 Directors’ personal pension schemes
2018
£’000
1,187
16
1,203
2017
£’000
1,153
13
1,166
During the year, the Company had seven (2017: seven) Directors, including four Non-Executive Directors, providing
services to the Group. During the year, two Directors (2017: two) received contributions to their personal pension
schemes.
Emoluments of the highest paid Director:
Emoluments
Pension costs - paid to the Director’s personal pension scheme
2018
£’000
541
11
552
2017
£’000
523
10
533
Details of Directors’ remuneration and pension contributions are disclosed in the Directors’ Remuneration Report on
pages 26 to 29.
Cost and net book value at beginning of year
Purchase of shares in a subsidiary undertaking
Cost and net book value at end of year
2018
£’000
83,315
-
83,315
2017
£’000
44,817
38,498
83,315
The Directors consider that the value of the Company’s fixed asset investments, which are listed below, is supported
by their underlying profitability.
The following were the wholly-owned subsidiary undertakings and have been consolidated in the consolidated
financial statements:
RWS Information US LLC
(formerly Article One Partners LLC)
Registered
address
90 Broad Street, Suite 402,
New York, NY 10004, USA
Nature of
business
IP searches
Corporate Translations Inc.
101 East River Drive, East Hartford,
Translation and linguistic validation
inovia LLC
Lawyers’ and Merchants’ Translation Bureau Inc
RWS US Holding Co. Inc
LUZ, Inc
RWS Life Sciences Inc
inovia Europe GmbH
RWS Group Deutschland GmbH
Connecticut, CT 06108, USA
90 Broad Street, Suite 402,
New York, NY 10004, USA
Patent translation and filing
Patent translation
Holding company
555 Montgomery Street, Suite 720,
Translation and linguistic validation
San Francisco, CA 94111, USA
Translation and linguistic validation
Munchner Freiheit 20,
80802 Munich, Germany
Joachimsthaler Str. 15,
10719 Berlin, Germany
Patent translation and filing
Technical and legal translation
KK RWS Group
Sumitomo Hamamatsu-cho, Bldg. 3FI
Patent translation
1-18-16 Hamamatsu-cho, Minato-ku, Tokyo 105-0013, Japan
LUZ SarL
1005 Lausanne, Switzerland
Avenue Mon-Repos 14,
Translation and linguistic validation
RWS Schweiz GmbH
4001 Basel, Switzerland
Barfusserplatz 3, Postfach,
Technical and legal translation
inovia Pty Holdings Limited
Sydney, NSW 2000, Australia
Suite 4, Level 12, 45 Clarence Street,
Patent translation and filing
Beijing RWS Science & Technology
Information Consultancy Co. Ltd
4th Floor, Zhouji Building B, No.9 Dixingju,
Patent translation and filing
Ande Road, Doncheng District, Beijing 100011, China
Annual Report 2018Annual Report 2018 Notes to the
PARENT COMPANY FINANCIAL STATEMENTS
82
Notes to the
PARENT COMPANY FINANCIAL STATEMENTS
83
Contents
Contents
Notes to the
PARENT COMPANY FINANCIAL STATEMENTS
(continued)
The following were the wholly-owned subsidiary undertakings and have been consolidated in the financial
statements:
8. DEBTORS
Communicare Limited
Europa House, Chiltern Park, Chiltern Hill, Chalfont St Peter,
Technical and legal translation
Registered
address
Nature of
business
Corporate Translations UK Limited
Eclipse Translations Limited
Japanese Language Services Limited
Pharmaquest Limited
RWS Group Limited
RWS Information Limited
RWS (Overseas) Limited
RWS Translations Limited
RWS UK Holding Co. Limited
Buckinghamshire, SL9 9FG, England
Translation and linguistic validation
Technical and legal translation
Technical and legal translation
Technical and linguistic validation
Holding company
IP searches
Holding company
Patent translation
Holding company
Moravia US Holding Company Inc
Thousand Oaks, CA 91360, USA
Holding Company
223 E Thousand Oaks Blvd, Suite 202,
Moravia US Intermediate Holding Company LLC
223 E Thousand Oaks Blvd, Suite 202,
Holding Company
Thousand Oaks, CA 91360, USA
Moravia IT, LLC
223 E Thousand Oaks Blvd, Suite 202,
Localization
Thousand Oaks, CA 91360, USA
Moravia LUX Holding Company Sarl
Moravia LUX Intermediate Holding Co. SARL
14 rue Edward Steichen, L – 2540,
Luxembourg
Holding Company
Holding Company
Moravia IT s.r.o.
Prikop 262/15, Zabrdovice, 602 00 Brno,
Localization
Czech Republic
Moravia IT (Nanjing) Co. Ltd
3F Hongxin Mansion, 98 Jianye Road, Qinhuai District, Nanjing,
Localization
210004 Jiangsu, China
Moravia IT Hungary
Visegradi utca, H-1132 Budapest, Hungary
Localization
All subsidiary undertakings, except RWS Group Limited, are held indirectly.
Amounts owed by Group undertakings
Other debtors
Prepayments
Amounts due within one year
2018
£’000
228,317
76
264
228,657
2017
£’000
14,106
15
42
14,163
Amounts owed by Group undertakings are unsecured, interest free, have no fixed date of repayment and are
repayable on demand.
9. LOAN
Due in less than one year
Loan
Due in more than one year
Loan
2018
£’000
2017
£’000
14,371
8,955
46,812
31,343
On 3 November 2017, the Group acquired the entire issued share capital of Moravia US Holding Co. Inc and Moravia
LUX Holding Company Sarl (together “Moravia”), a leading provider of technology-enabled localization services for
a cash consideration of US$320m, plus working capital and certain other adjustments and transaction costs. These
were funded by a £185m (before expenses) cash placing of new ordinary shares and a new US$160m loan, which
refinanced the Group’s existing facility. During the year, US$64.3m of this facility was novated to Moravia, with effect
from the acquisition date, with each entity repaying their share of the loan and interest.
10. TRADE AND OTHER PAYABLES
Trade creditors
Amounts owed to Group undertakings
Accruals
2018
£’000
100
673
1,278
2,051
2017
£’000
12
-
349
361
Amounts owed to Group undertakings are unsecured, interest free, have no fixed date of repayment and are
repayable on demand.
Annual Report 2018Annual Report 2018 Notes to the
PARENT COMPANY FINANCIAL STATEMENTS
84
Notes to the
PARENT COMPANY FINANCIAL STATEMENTS
85
Contents
Contents
Notes to the
PARENT COMPANY FINANCIAL STATEMENTS
(continued)
11. DEFERRED TAX
Deferred tax liabilities
14. GUARANTEES AND OTHER FINANCIAL COMMITMENTS
2018
£’000
37
2017
£’000
42
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 amounted to £nil (2017: £nil).
The loan of US$160m, taken out with a syndicate of banks to part fund the acquisition of Moravia, has been
guaranteed against the assets of Moravia and other fellow subsidiary undertakings.
12. FINANCIAL INSTRUMENTS
The Company had no derivative financial instruments outstanding at the year-end (2017: £281,000).
15. POST BALANCE SHEET EVENTS
There were no other significant events that occurred between the balance sheet date and the date of authorization
of these financial statements.
An analysis of the Company’s forward contracts’ maturity is as follows:
Up to three months
Three to six months
Six to 12 months
2018
£’000
-
-
-
-
2017
£’000
88
74
119
281
13. SHARE CAPITAL AND RESERVES
2018
Number
2018
£’000
2017
Number
2017
£’000
Authorized
Ordinary shares of 1 pence each (2017: 1 pence)
500,000,000
5,000
500,000,000
5,000
Allotted, called up and fully paid
At beginning of year
Issue of shares
229,361,225
44,182,047
2,293
442
215,764,650
13,596,575
At end of year
273,543,272
2,735
229,361,225
2,157
136
2,293
The increase in share capital was as a result of a placing of 43,529,412 shares on 20 October 2017 as part of the
funding of the Moravia acquisition, and as a result of the exercise of 652,635 share options by senior management.
Reserves
The nature and purpose of each reserve within equity is as follows:
> The balance on the capital reserve is an amount not distributable to shareholders and not transferred to the Income
Statement.
> Share-based payment reserve is the credit arising on the share-based payment charges in relation to the Company’s
share option schemes.
> Retained earnings are the cumulative net gains and losses, including the capital reserve from the Company balance
sheet.
Annual Report 2018Annual Report 2018 Shareholder Information
86
Contents
Shareholder Information
CORPORATE HEADQUARTERS AND REGISTERED OFFICE
Company No. 03002645
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
REGISTRARS
Link Market Services Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Tel: 087 1664 0300
from outside the UK: +44 (0) 371 664 0300
Email: enquiries@linkgroup.co.uk
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
SOLICITORS
CMS Cameron Mckenna Nabarro Olswang LLP
Cannon Place
78 Cannon Street
London EC4N 6AF
PRINCIPAL BANKERS
Barclays Bank plc
1 Churchill Place
Canary Wharf
London E14 5HP
Annual Report 2018 RWS Holdings plc
ANNUAL REPORT 2018
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
Email rws@rws.com
Web rws.com