Half Yearly Report

For immediate release 2 June 2014

RWS Holdings plc ("the Group")

Half year report for the six months to 31 March 2014

Excellent performance from core business

RWS Holdings plc (RWS), the world's leading provider of intellectual property support services (patent translations, searches and international patent filing solutions), and commercial translations, today announces its half year results for the six months ended 31 March 2014.

Financial Highlights:

· Sales for the period up by 28% to £46.9m (H1 2013: £36.7m)

o Sales up by 31% on a constant currency basis to £48.2m (H1 2013: £36.7m)

· Adjusted operating profit* was up by 6% to £11.0m (H1 2013: £10.4m).

o Adjusted operating profit* up by 18% compared to £9.3m in H1 2013 which excludes £1.1m one off net currency gain in the prior period from holding US dollars for the inovia acquisition

· Adjusted profit before tax* rose by 2% to £10.8m (H1 2013: £10.6m)

o Adjusted profit before tax* up by 14% compared to £9.5m in H1 2013 which excludes £1.1m one off net currency gain in the prior period from holding US dollars for the inovia acquisition

· Adjusted earnings per share* were flat at 18.9p (H1 2013: 18.9p)

· Interim dividend increased by 9% to 4.9p (2013: 4.5p)

· Net cash at period end £14.9m (H1 2013: £28.0m) after US$23.3m acquisition of inovia and £4.3m purchase of new building

* before amortization of intangibles and 2014 share option cost of £0.5m

Operational Highlights:

· 9% increase in underlying revenues in the patent translations business (56% of Group sales):

· Good momentum from 2013 client wins during the first half

· Further strong growth in China

· Satisfactory local currency performance in Japan

· Maintained revenues in commercial translations, with a focus on attractive specialist niches in a competitive environment both in the UK and Europe

· 19% increase in information revenues driven primarily by a 41% increase in search revenues

· inovia grew gross revenues by 28% to US$16.1m (H1 2013: US$12.6m)

· Intellectual property support services now account for over 80% of Group revenues

Current Trading and Outlook:

· Trading performance in the first two months of the second half has been good despite continued £ sterling strength

· 2013 clients wins expected to benefit the second half results more than the first half

· Encouraging pipeline of opportunities in patents business

· Net estimated Euro trading exposure hedged at 1 Euro = 87p until 30 September 2014, at 1 Euro = 83.5p from 1 October to 31 December 2014 and at 1 Euro = 81.3p from 1 January 2015 to 31 March 2015

· H2 2013 comparative experienced a significant loss on US$ holdings held for inovia acquisition in September 2013, which will not be repeated in H2 2014

Andrew Brode, Chairman of RWS, commented:

"RWS' position as the premier supplier of intellectual property support services has proved to be a resilient business model in recent years and as the economic climate improves we expect to continue to extend our share of the patent translation and intellectual property services markets. First half results have been promising despite the currency headwinds and we anticipate greater benefit from 2013 client wins in the second half than we saw in the first half.

"Our financial position remains strong and we have an encouraging pipeline of new business opportunities to exploit. We, therefore, expect continued progress in the second half of the year and beyond."

For further information contact:

RWS Holdings plc

Andrew Brode, Chairman 01753 480200

MHP

Katie Hunt / Simon Hockridge / Nick Hayns 020 3128 8100

Numis

Stuart Skinner (Nominated Adviser) 020 7260 1000

James Serjeant (Corporate Broker)

About RWS:

RWS is the world's leading provider of patent translations and one of Europe's leading players in the provision of intellectual property support services and high level technical, medical, commercial, legal and financial translation services. Specialist divisions provide for the diverse needs of a blue-chip multinational client base from Europe, North America and Asia in the aerospace, automotive, chemical, defence, electronics, financial, insurance, legal, medical, pharmaceutical and telecommunications industries. RWS is based in the UK, with offices in Europe, New York, Tokyo, Beijing and Sydney, and is listed on AIM, the London Stock Exchange regulated market (RWS.L).

In September 2013, RWS completed the acquisition of inovia Holdings Pty Limited which is headquartered in New York and is the largest non-law firm provider of international patent filing solutions globally. Its patented, web-based technology provides over 1000 law firm and corporate clients with cost effective processing of international patent applications, typically producing cost savings in excess of 30%. From its locations in the US, Australia and Europe, its patent filing service covers 124 countries.

Over 2,000,000 patent applications are filed globally per annum. Applications under the Patent Cooperation Treaty "PCT" regime grew by 5.1% in 2013 to 205,300, whilst applications to the European Patent Office increased by 2.8% to 265,690. Both of these numbers established new all-time highs. Applications from Asia have also shown significant recent growth.

For further information please visit: www.rws.com

Chairman's Statement

The Group has delivered a solid performance in the first half of the current financial year in the face of considerable currency headwinds, especially for units trading in US dollars or Japanese yen.

The core patent translations business further enhanced its market leading position, underpinned by growth in demand from new and existing clients, and continuing progress in China and Japan. Our information division performed exceptionally well, primarily due to a welcome recovery in demand for search services as well as continued progress in PatBase subscriptions. In commercial translations, we have focused on more attractive specialist niches in the context of a competitive environment in both in the UK and Europe.  inovia's sales advanced by 28% in dollar terms but profitability was held back by a shift in customer mix and restructuring costs.

Business Overview

RWS is the world's leading provider of patent translations and one of Europe's leading players in the provision of intellectual property support services and high level technical, medical, commercial, legal and financial translation services. Its main business - patent translation - translates well over 65,000 patents and intellectual property related documents each year. It has a blue chip multinational client base from Europe, North America and Asia, active in patent filing in the medical, pharmaceutical, chemical, aerospace, defence, automotive and telecoms industries, as well as patent agents acting on behalf of such clients. The Group has three principal business activities: Translations, which accounts for almost 75% of sales and incorporates patent and commercial translation services; Information, which includes a comprehensive range of patent search, retrieval and monitoring services as well as PatBase, one of the world's largest searchable commercial patent databases, access to which is sold exclusively as a subscription service; and inovia, the largest non-law firm provider of international patent filing solutions globally.

Strategy

Our strategy is focused upon organic growth complemented by deploying our substantial cash holdings for selective acquisitions, providing they can be demonstrated to enhance shareholder value. Organic growth is driven by increases in the worldwide patent filing activities of our existing and potential multinational clients, the growing demand for language services and our ability to increase our market share by winning new clients attracted by our leading position and reputation for outstanding quality, in an otherwise fragmented sector. Our substantive portfolio of intellectual property support services, further enhanced through the acquisition of inovia, offers cross-selling opportunities and strengthens our position in the IP market.

In terms of acquisitive growth, having been generally pleased with the return on acquisitions made to date, we continue to search for suitable potential acquisitions in the high level commercial translation and intellectual property support services spaces. We seek niche businesses capable of delivering well above industry average levels of profitability or highly complementary businesses capable of reinforcing our dominant position in intellectual property support services.

Results and Financial Review

Sales for the six months ended 31 March 2014 were up by 31% to £48.2m on a constant currency basis or by 28% to £46.9m on a statutory basis (H1 2013: £36.7m). 

Profit before tax, amortization of intangibles and, in 2014, £0.5m of share option cost, reached £10.8m compared to £10.6m in 2013. However the H1 2013 result benefitted from an unrealised gain on the US dollar balances held for the completion of the inovia acquisition. The net effect of this is a year on year adverse exchange rate movement of £1.1m. Therefore, the increase in underlying profit before tax, after adjusting for this movement, is 16%. Adjusted diluted earnings per share were flat at 18.9p (2013: 18.9p). 

At 31 March 2014, shareholder funds had reached £71.9m (2013: £65.5m), of which net cash represented £14.9m (H1 2013: £28.0m, FY 2013: £18.2m). This is after the recent major cash outlays of US$23.3m consideration for the acquisition of inovia in September 2013 and the purchase of Building 3 at Chiltern Park at a cost of £4.3m to provide space for future expansion. In addition the interim and final dividends for 2013, of £1.9m & £6.7m were paid in July 2013 and February 2014, respectively.

Currency Effects and Hedging

Reported revenues were £1.3m lower than they would have been on a constant currency basis, as a result of the strong performance of the £ sterling. The Group is principally exposed to exchange rates for the Euro and, more recently, the US dollar. The average rate used for conversion of the Euro was 83.1p to the € versus 83.3p in the first half of 2013. For the US dollar, the average rate was 1.65 dollars to the £ versus 1.58 dollars in the first half of 2013, a decline of 4%. The average rate for the Japanese yen declined by 22%.

As a result of benefitting from holding unhedged US dollar balances in anticipation of the inovia acquisition at 31 March 2013, and movements in other currencies, the Group recorded a net unfavourable exchange variance of £1.1m when compared to the first half of 2013.

Looking forward, the Group has hedged its estimated net trading exposure to the Euro at 1 Euro = 87p from 1 July 2014 to 30 September 2014, at 1 Euro = 83.5p from 1 October 2014 to 31 December 2014 and at 1 Euro = 81.3p from 1 January 2015 to 31 March 2015.

Dividend

The Directors have approved an interim dividend of 4.9p per share, an increase of 9% over the 2013 interim dividend of 4.5p per share, reflecting both the Group's strong financial position and the Board's confidence in the Group's ability to deliver further progress in the full financial year and beyond. This dividend will be paid on 25 July 2014 to those shareholders on the register on 27 June 2014. The Group remains committed to a progressive dividend policy, as announced at flotation in November 2003 and delivered every year since then.

Operating Review

Patent Translations

The Group's core patent translations business, which now accounts for approximately 56% of Group sales, grew its underlying revenues by 9% to £26.3m (2013: £24.2m, after elimination of £1.9m of intercompany sales to inovia) driven by momentum from 2013 client wins, further growth in China, a satisfactory performance in Japan in local currency terms, and organic growth from longer term clients. The Group has enhanced its market leadership servicing a worldwide blue-chip client base including many of the world's most active patent filers. Our clients include 10 of the top 15 applicants at the World Intellectual Property Office and 11 of the top 15 applicants at the European Patent Office in 2013. With the combined direct sales presence of RWS and inovia in the US, we remain optimistic about converting the opportunities we see in what remains the largest market for intellectual property support services. Further strong demand for our patent translation services from European and North American corporates seeking to file patent applications in China has allowed us to invest in additional headcount there which has now passed 50. As first described in our 2013 Annual Report, we have established a new Chinese production and training centre in Rizhao in co-operation with two local universities. This allows us to develop our Chinese offering but at lower cost than in Beijing. A new cooperation project with other universities has just commenced and will add to the resources and resilience of our Chinese operations. We have continued to develop our relationship with international patent bodies seeking translation of Chinese patent prosecution documents.

Commercial Translations

Our commercial translations business, which accounts for approximately 17% of Group sales, saw flat revenues of £8.0m (2013: £8.0m). This business includes all non-patent translations, the service sector where we encounter most competition and the markets most exposed to economic cycles. In the first half of the current financial year we experienced strong competition both in the UK and Europe, with margin pressures, and we have focused on specialist niches where more attractive margins are obtainable. We also experienced subdued trading in our German and Swiss operations, where a cyclical downturn was evident in German-speaking Europe. Plans are in place to develop a production centre for patent translations within our Berlin operations to service the Group.

Information

Our information business accounts for 7% of Group sales and grew by 19% to £3.1m during the half year (2013: £2.6m). In particular, our patent search and watch services grew by 41%. High margin revenues from PatBase subscriptions grew by 4%, reflecting the database's further market share gain as we continued to invest in searchability features and geographic coverage.

inovia

inovia, where the Group acquired the remaining two thirds of the equity in late September 2013, now forms the fourth element of the Group's business and accounted for 20% of Group sales. On a constant currency basis, inovia achieved a 28% increase in gross sales to US$16.1m (H1 2013: US$12.6m). In sterling terms, net sales revenues for the half year reached £9.5m. As a full member of the Group, inovia has been active in developing relationships with European corporates, with some success. This initiative has however resulted in margin compression. In addition, senior sales management in the USA (inovia's key market) has been restructured following a review of operations. Apart from directly servicing their clients' filing needs, the inovia business also generates a large volume of patent translation work for the group.

Following the completion of the inovia acquisition, RWS' intellectual property support services revenues now account for in excess of 80% of the Group's sales.

Market and Regulatory Update

Patent Filing Statistics

In March, the World Intellectual Property Office (WIPO) published figures showing a 5.1% increase in the 2013 PCT filings to 205,300 (2012: 195,400). The European Patent Office (EPO) also published figures in January showing the total number of European patent filings increased by 2.8% to 265,690 (2012: 258,450). Both the WIPO and EPO figures established new records for numbers of filings. European filings from Chinese applicants grew by 15.6%.

European Union Patent

We have in the past drawn the market's attention to the proposed European Union Patent ("the Unitary Patent") and its potential impact upon the Group's sales and profits. Despite significant hurdles, the Unitary Patent has been making further progress. However, it appears to be consensus now that the earliest implementation would be in 2016 and that this is still very optimistic. It should be noted that a number of member states of the current European Patent system are not EU members, and that Spain and Italy remain implacably opposed to the Unitary Patent. Professional opinion remains highly sceptical both as regards jurisdiction and the fee structure.

Because the proposed Unitary Patent will run in parallel with the existing system and will have a new and untried litigation system, our research indicates that there is currently little interest amongst large corporates and their professional advisers in using the new system. That being the case, we anticipate minimal loss of revenues in the first few years after the introduction of the Unitary Patent.

People

As always, RWS depends upon its staff and their ongoing commitment to providing and maintaining the high levels of service our clients expect. Headcount has now reached 590 full time equivalents (2013: 524), and I thank them for their contribution to the Group's continuing market leadership.

Current Trading and Outlook

We have had a good start to the second half of the year notwithstanding the continued appreciation of sterling.

We have an encouraging pipeline in our core patent translations business, our information business continues to outperform, we have taken action to both improve margins at inovia, where we continue to see strong sales growth, and reduce overheads in our German operations.

We anticipate greater benefit from 2013 client wins in the second half than we saw in the first half and we are well placed to continue increasing our leading share of the global intellectual property support services market. We, therefore, expect continued progress in the second half of the year and beyond.

Andrew Brode

Chairman

2 June 2014

RWS Holdings plc

Condensed Consolidated Statement of Comprehensive Income

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

RWS Holdings plc

Condensed Consolidated Statement of Financial Position

RWS Holdings plc

Condensed Consolidated Statement of Changes in Equity

RWS Holdings plc

Condensed Consolidated Statement of Cash Flows

RWS Holdings plc

Notes to the Condensed Consolidated Financial Statements

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1 Accounting policies

Basis of preparation

The interim financial statements were approved by the Board of Directors on 30 May 2014. The interim results for the half years ended 31 March 2014 and 31 March 2013 are neither audited nor reviewed by our auditors and the accounts in this interim report do not therefore constitute statutory accounts in accordance with Section 434 of the Companies Act 2006. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 September 2013.

The Group's statutory accounts for the year ended 30 September 2013 have been filed with the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain any statements under s498 (2) or (3) of the Companies Act 2006 and did not contain any matters to which the auditors drew attention without qualifying their report.

The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial statements as were applied in the Group's latest annual audited financial statements.

2 Segmental reporting

The Group comprises three principal divisions:

· Translation division (for management reporting analysed between UK and Overseas operations) providing patent and technical document translation, filing and localisation services in the UK, USA, Europe, Japan and China.

· inovia division. Following the acquisition of inovia Holdings Pty Limited on 17 September 2013, the Group has treated their results as a separate division and has reported them as such. inovia is a leading provider of web based international filing solutions.

· Information division, which offers a full range of patent search, retrieval and monitoring services as well as an extremely comprehensive patent database service accessible by subscribers, known as PatBase.

The unallocated segment relates to corporate overheads, assets and liabilities.

The segment results for the six months ended 31 March 2014 are as follows:

The segment results for the year ended 30 September 2013 were as follows:

3 Finance income and expense

4 Dividends

5 Earnings per Ordinary share

7 Events since the reporting date

No significant events have occurred since 31 March 2014 at the date of authorisation of these financial statements.