31st May 2006 07:01
RWS Holdings PLC31 May 2006 31 May 2006 RWS Holdings plc Interim for the year ended 31 March 2006 RWS Holdings plc (RWS), Europe's leading provider of intellectual propertysupport services (patent translations and technical searches) and technicaltranslations, is pleased to announce its unaudited interim results for the sixmonths ended 31 March 2006. Highlights: • Sales increased by 13% to £19.4M • Profit before tax and goodwill increased by 29.2% to £4.5M (new record) • Normalised earnings per share were 8.1p (2005 - 6.4p), on an increased number of shares in issue • Interim dividend increased by 12% to 1.85p per share • Excellent cash flow from operations; net cash of £13.3M at 31 March • Eclipse (2005 acquisition) fully integrated and performing ahead of expectations • High margin database service - PatBase - has secured subscriptions well in excess of targets • Solid growth in the core business underpinned by client wins and rising numbers of patent applications • Foreign exchange exposure in Euros and US dollars largely hedged to 30 September at favourable rates Executive Chairman, Andrew Brode commented: "RWS is pleased to be reporting further substantial growth and record financialachievements. Our strategy of building upon our market leading positions in patenttranslations and information search and supply, where quality is at a premium,has been demonstrably successful. Our finances and order book are strong. Intellectual property protection isgaining in importance worldwide and provides the fundamental driver for ourbusiness. These factors underpin our confidence in further progress in thesecond half of the year." For further information, please contact: RWS Holdings plcAndrew Brode Tel: 01753 480200 Weber Shandwick Square MileNick Oborne Tel: 020 7067 0700 About RWS RWS is Europe's leading provider of intellectual property support services(patent translations and technical searches to the medical, pharmaceutical,chemical, aerospace, defence, automotive and telecoms industries). RWS alsoprovides specialist technical, legal and financial services for areas outsidethe patent arena. RWS is based in the UK with offices in Europe, North America,Japan and China. For further information visit www.rws.com RWS Holdings plcInterim Results 2006Chairman's Statement_______________________________________________________________________________________________ I have pleasure in presenting a further record set of results for your Companyfor the six months ended 31 March 2006. Business Overview RWS is Europe's leading provider of intellectual property support services andhigh level technical, legal and financial translation services. The corebusiness - patent translations - is the largest operation of its kind in Europe,translating over 30,000 patents and intellectual property related documents eachyear. It services a blue chip multinational client base from Europe, NorthAmerica and Japan, active in patent filing in the medical, pharmaceutical,chemical, aerospace, defence, automotive and telecoms industries, as well aspatent agents acting on behalf of similar clients. The Group comprises twoprincipal business units - Translations and Information. The Translations'activities account for over 90% of sales. The Information unit offers acomprehensive range of patent search, retrieval and monitoring services and hasrecently developed PatBase, the largest collection of patent families, availableas a subscription service. Strategy Our strategy is to focus upon organic growth driven by the rising numbers ofpatent applications worldwide. We expect to build market share through theexploitation of our leading position and reputation in what is otherwise afragmented sector. We will deploy our substantial cash holdings for selectiveacquisitions providing they can be demonstrated to enhance shareholder value. Results RWS has continued to grow, driven by its market leading position in its corepatent translation activity. Sales and profit for the six months ended 31 March 2006 again achieved recordlevels. Sales grew by 13% to £19.4M; profit before tax and goodwill amortizationrose by 29% to £4.5M (2005: £3.5M). The Group benefited from margin improvement,a full contribution from Eclipse and favourable currency movements. Earnings and Dividend Normalised earnings per share were 8.1p (2005: 6.4p) on an increased number ofshares in issue. The Directors have approved an interim dividend of 1.85p per share, an increaseof 12% over the 2005 interim dividend of 1.65p per share. Operating Review Translations Patent translations account for 80% of our business and showedcontinued progress from a combination of increased patent grants and newcorporate clients. The RWS "translate and file" service commends itself tomultinational corporates seeking comprehensive geographical patent protection,and is both competitive and of high quality. We have successfully replicated theEuropean model in Japan and will now seek to capitalise upon strong clientinterest in our embryonic operation in China. Commercial translations (medical, legal, financial etc.) have performed well ina competitive marketplace. In particular, Eclipse Translations which wasacquired in February 2005, has more than exceeded our expectations andmaintained its margins. Information The Information business unit now accounts for somewhat less than10% of sales. The core patent search and watch services remain flat as corporatebudgets are constrained. However, costs are under good control and margins,already superior, have improved further. The PatBase subscription database service continues to attract worldwidesubscriber interest and has already become a useful contributor to Groupprofits. We are about to complete a comprehensive upgrade to the functionalityof the service and to market simplified access to broaden the appeal tocorporate research departments. Financial Review RWS' financial position has strengthened considerably with net assets of £18.6M,to include net cash of £13.3M. Free cash inflow was £2.7M, and overall net cashinflow was £1.4M. As a people-intensive business, capital expenditure hashistorically been modest and was £113,000 in the six month period. Additionalworking capital of £800,000 funded the growth in sales. As at 31 March 2006 the Group had hedged much of its Euro/Sterling exposure atrates averaging 69.75, to the end of the financial year. US Dollar exposure issimilarly hedged at 1.74 per £ sterling. People RWS relies entirely upon the quality of its staff to deliver the servicesdemanded by our worldwide clientele. As at 31 March 2006 the Group employed 344people and their productivity showed further improvement over 2005. As ever, wehave vacancies for good technical translators and linguists. Recruitment of theright calibre of staff to match client requirements remains the key challenge. Outlook With economic recovery beginning in the Eurozone, especially in Germany, ourcore overseas market, and the continuing focus of our clients upon comprehensiveintellectual property protection, RWS has every reason to expect furtherprogress. Our financial position is strong; our major client base continues toexpand and your Board is therefore justifiably confident about the outturn for2006. Andrew BrodeExecutive Chairman30 May 2006 RWS Holdings plcInterim ReportGroup Profit and Loss Account________________________________________________________________________________________________ 6 months ended Year ended 6 months ended 31 March 2006 30 September 2005 31 March 2005 Note £'000 £'000 £'000________________________________________________________________________________________________ Turnover 1 19,400 35,875 17,185Cost of sales (11,488) (21,198) (10,170)________________________________________________________________________________________________Gross profit 7,912 14,677 7,015Administrative expenses (3,607) (7,648) (3,739)Amortization of goodwill (323) (616) (289) ________________________________________Total administrative expenses (3,930) (8,264) (4,028) ________________________________________________________________________________________________________________________________________Group operating profit before goodwill amortization 4,305 7,029 3,276________________________________________________________________________________________________Group operating profit and profit on ordinary activities before interest 3,982 6,413 2,987 Net interest 210 412 219________________________________________________________________________________________________Profit on ordinary activities before 4,192 6,825 3,206taxationTaxation 2 (1,372) (2,265) (1,076)________________________________________________________________________________________________Profit for the financial period (Profit attributable to shareholders) 2,820 4,560 2,130________________________________________________________________________________________________All amounts relate to continuingactivities Earnings per share 4 Pence Pence PenceBasic 7.3 11.9 5.6Diluted 6.8 11.1 5.2 RWS Holdings plcInterim ReportGroup Statement of Total Recognised Gains and Losses_______________________________________________________________________________________________ 6 months ended Year ended 6 months ended 31 March 2006 30 September 2005 31 March 2005 £'000 £'000 £'000_______________________________________________________________________________________________ Profit for the financial period 2,820 4,560 2,130 Exchange adjustments on retranslation of net assets of subsidiaryundertakings (24) (25) 12_______________________________________________________________________________________________Total recognised gains and losses for the financial period 2,796 4,535 2,142_______________________________________________________________________________________________ RWS Holdings plcInterim ReportGroup Balance Sheet_______________________________________________________________________________________________ 31 March 30 September 31 March 2006 2005 2005 Note £'000 £'000 £'000_______________________________________________________________________________________________Fixed assetsIntangible assets 6,726 7,049 7,376Tangible assets 896 935 974_______________________________________________________________________________________________ 7,622 7,984 8,350_______________________________________________________________________________________________Current assetsWork in progress 1,011 773 742Debtors: due within one year 7,284 6,571 6,423Cash at bank 13,494 12,280 9,958 _________________________________________ 21,789 19,624 17,123 Creditors: amounts due within one year 5 (10,759) (10,437) (10,223)_______________________________________________________________________________________________Net current assets 11,030 9,187 6,900_______________________________________________________________________________________________Total assets less current liabilities 18,652 17,171 15,250 Creditors: amounts due after one year - - (27)_______________________________________________________________________________________________Net assets 18,652 17,171 15,223_______________________________________________________________________________________________Capital and reservesCalled up share capital 1,942 1,922 1,914Share premium account 1,719 1,378 1,199Capital reserve 157 68 68Share option reserve 1,873 1,962 1,962Reverse acquisition reserve (8,483) (8,483) (8,483)Profit and loss account 6 21,434 20,314 18,553_______________________________________________________________________________________________Shareholders' funds - equity interests 7 18,642 17,161 15,213Minority interests in equity 10 10 10_______________________________________________________________________________________________ 18,652 17,171 15,223_______________________________________________________________________________________________ RWS Holdings plcInterim ReportGroup Cash Flow Statement_______________________________________________________________________________________________ 6 months ended Year ended 6 months ended 31 March 2006 30 September 2005 31 March 2005 Note £'000 £'000 £'000_______________________________________________________________________________________________Net cash inflow from operating activities 3,650 7,142 3,342 Returns on investments and servicing offinanceInterest received 204 401 212Interest paid (1) (1) (3)_______________________________________________________________________________________________ 203 400 209_______________________________________________________________________________________________Tax paid (1,077) (2,143) (975) Capital expenditure and financial investmentPurchase of tangible fixed assets (113) (233) (91) ________________________________________Free cash flow 2,663 5,166 2,485 Acquisitions and disposalsAcquisition of subsidiary undertakings - (2,430) (2,430)Net overdraft in subsidiary undertakings acquired - (249) (249)_______________________________________________________________________________________________ - (2,679) (2,679)_______________________________________________________________________________________________Equity dividends paid to shareholders (1,676) (1,970) (1,338)_______________________________________________________________________________________________Cash inflow/(outflow) before financing 987 517 (1,532) FinancingIssue of ordinary shares 361 674 487_______________________________________________________________________________________________Increase/(decrease) in cash 1,348 1,191 (1,045)_______________________________________________________________________________________________ RWS Holdings plcInterim ReportNotes to the Group Cash Flow Statement_______________________________________________________________________________________________ 6 months ended Year ended 6 months ended 31 March 2006 30 September 2005 31 March 2005 £'000 £'000 £'000_______________________________________________________________________________________________Reconciliation of operating profit tonet cash flow from operating activities Group operating profit 3,982 6,413 2,987Depreciation and amortization 474 958 449Work in progress increase (238) (91) (60)Debtors increase (705) (1,341) (683)Creditors increase 161 1,218 649Other non-cash movements (24) (15) -_______________________________________________________________________________________________Net cash inflow from operating activities 3,650 7,142 3,342_______________________________________________________________________________________________Reconciliation of net cash flow tomovement in net funds Increase/(decrease) in cash in the period 1,348 1,191 (1,045)Net funds at beginning of the period 11,929 10,738 10,738_______________________________________________________________________________________________Net funds at end of the period 13,277 11,929 9,693_______________________________________________________________________________________________Analysis of net funds At 1 October Cash At 31 March 2005 Flow 2006 £'000 £'000 £'000 _________________________________________Cash 12,280 1,214 13,494Overdrafts (351) 134 (217)_______________________________________________________________________________________________ 11,929 1,348 13,277_______________________________________________________________________________________________ RWS Holdings plcInterim ReportNotes_______________________________________________________________________________________________ 6 months ended Year ended 6 months ended 31 March 2006 30 September 2005 31 March 2005 £'000 £'000 £'000_______________________________________________________________________________________________1 Turnover and segmental information Turnover and operating profit derive from continuing operations Turnover by class of business Translation and localization services 18,143 33,327 15,886 Information services 1,257 2,548 1,299 _________________________________________ 19,400 35,875 17,185 _________________________________________ Turnover by geographic location of Group undertakings United Kingdom 17,454 31,748 15,050 Continental Europe 308 611 301 Japan 1,548 3,339 1,701 United States of America 90 177 133 _________________________________________ 19,400 35,875 17,185 _________________________________________ Turnover by geographic market in which customers are located United Kingdom 2,481 4,882 2,212 Continental Europe Germany 7,328 13,284 5,908 France 2,432 3,698 1,956 Other 3,855 6,695 3,308 _________________________________________ 13,615 23,677 11,172 Japan 1,172 2,446 1,287 United States of America 2,052 4,747 2,456 Other 80 123 58 _________________________________________ 19,400 35,875 17,185 _________________________________________ _______________________________________________________________________________________________ RWS Holdings plcInterim ReportNotes (continued)_______________________________________________________________________________________________ 2 Taxation - the charge for the 6 months ended 31 March 2006 is at the rate that is anticipated will be applicable for the whole year. The Group has estimated capital losses of £20 million available for offset against the capital gain arising on the redemption of loan notes in the year ended 30 September 2004. As the quantum of the capital losses has not been agreed the offset of the capital losses has not been recognised in the current tax charge._______________________________________________________________________________________________ 3 Dividends 6 months ended Year ended 6 months ended 31 March 2006 30 September 2005 31 March 2005 _______________________________________________ Ordinary shares Interim paid of 1.65p - 632 - Final dividends proposed for the prior year of: 4.35p paid 16 February 2006 (3.5p, paid 7 March 2005) per share 1,676 1,338 1,338 _______________________________________________ 1,676 1,970 1,338 _______________________________________________ An interim dividend of 1.85p (interim 2005 - 1.65p, paid 30 June 2005) per Ordinary share will be paid on 14 July 2006 to Shareholders on the Register at 16 June 2006. This dividend, which was approved by the Directors after the balance sheet date, has not been recognised as a liability at 31 March 2006._______________________________________________________________________________________________ 4 Earnings per Ordinary share 6 months ended 6 months ended 31 March 2006 31 March 2005 Earnings EPS Earnings EPS £'000 Pence £'000 Pence _____________________________________________ Basic earnings 2,820 7.3 2,130 5.6 Goodwill amortization 323 0.8 289 0.8 _____________________________________________ Normalised earnings 3,143 8.1 2,419 6.4 _____________________________________________ Number of shares Number of shares Number of shares 6 months ended Year ended 6 months ended 31 March 2006 30 September 2005 31 March 2005 ____________________________________________________ Diluted earnings per share are based on the group profit for the period and a weighted average of Ordinary shares in issue during the period calculated as follows: In issue 38,566,268 38,204,648 38,093,574 Dilutive potential Ordinary shares arising from unexercised share options 2,887,388 2,735,932 2,697,289 ____________________________________________________ 41,453,656 40,940,580 40,790,863 ____________________________________________________ The weighted average number of Ordinary shares in issue reflects the 400,000 Ordinary shares issued under options exercised during the period. At 31 March 2006 there were unexercised options over a total of 3,474,472 (2005 - 4,040,472) Ordinary shares_______________________________________________________________________________________________ RWS Holdings plcInterim ReportNotes (continued) _______________________________________________________________________________________________ 5 Creditors: amounts due within one year include corporation tax of £5,804,000 (31 March 2005 - £5,474,000). The taxation amount includes £4,434,000 being the liability on the gain arising on the redemption of loan notes in the year ended 30 September 2004. _______________________________________________________________________________________________ 6 Reserves Share Share Other Profit and Shareholders' capital premium reserves loss account funds £000 £,000 £'000 £'000 £'000 _______________________________________________________ At 31 March 2005 as previously stated 1,914 1,199 (6,453) 17,921 14,581 Prior year adjustment: Restatement on adoption of FRS 21 (note 8) - - - 632 632 _______________________________________________________ At 31 March 2005 as restated 1,914 1,199 (6,453) 1 8,553 15,213 _______________________________________________________ At 30 September 2005 as previously stated 1,922 1,378 (6,453) 18,642 15,489 Prior year adjustment: Restatement on adoption of FRS 21 (note 8) - - - 1,672 1,672 _______________________________________________________ At 30 September 2005 as restated 1,922 1,378 (6,453) 20,314 17,161 _______________________________________________________ _______________________________________________________________________________________________ 7 Reconciliation of movements in shareholders' funds 6 months ended Year ended 6 months ended 31 March 2006 30 September 2005 31 March 2005 £'000 £'000 £'000 __________________________________________ Profit for the financial period 2,820 4,560 2,130 Dividends (note 3) (1,676) (1,970) (1,338) __________________________________________ 1,144 2,590 792 Other net recognised gains and losses relating to the financial period (24) (25) 12 Shares issued under options exercised 361 674 487 __________________________________________ Net additions to shareholders' funds 1,481 3,239 1,291 __________________________________________ Opening shareholders' funds as previously stated 15,489 12,599 12,599 Prior year adjustment: Restatement on adoption of FRS 21 (note 8) 1,672 1,323 1,323 __________________________________________ Opening shareholders' funds as restated 17,161 13,922 13,922 __________________________________________ Shareholders' funds at end of the period 18,642 17,161 15,213 __________________________________________ _______________________________________________________________________________________________ 8 Basis of preparation The interim financial statements were approved by the Board of Directors on 30 May 2006 and the interim results for the half years ended 31 March 2006 and 31 March 2005 are neither audited nor reviewed by our auditors. The accounts in this interim report do not constitute statutory accounts in accordance with Section 240 of the Companies Act 1985. Save as set out below, the financial information contained in this document has been prepared on the basis of accounting policies consistent with those set out in the Group's statutory accounts for the year ended 30 September 2005, which received an unqualified report and have been lodged with the Registrar of Companies. The figures for the year ended 30 September 2005 have been extracted from those statutory accounts. Change in accounting policies The Group has adopted FRS 21 "Events after the balance sheet date". Previously, equity dividends declared after the balance sheet date were recognised as liabilities at the period end, as required by company law and SSAP 17 "Accounting for post balance sheet events". In accordance with FRS 21 and recent changes to the law, if an equity dividend is declared after the balance sheet date but before the financial statements are authorised for issue, the dividend is not recognised as a liability at the balance sheet date. The adoption of FRS 21 has resulted in an increase in shareholders' funds of £1,672,000 at 1 October 2005 ( 1 October 2004 - £1,323,000) due to the write back of the dividend proposed at the balance sheet date. _______________________________________________________________________________________________ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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