TIDMRWS
RNS Number : 4112W
RWS Holdings PLC
12 December 2023
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No 596/2014 (as it
forms part of Retained EU Law as defined in the European Union
(Withdrawal) Act 2018).
For immediate release 12 December 2023
RWS Holdings plc
Results for the year ended 30 September 2023
Encouraging progress with growth initiatives, new client wins
and efficiency drive,
partly mitigating a challenging market
RWS Holdings plc ("RWS", "the Group", "the Company"), a unique
world-leading provider of technology-enabled language, content and
intellectual property services, today announces its final results
for the year ended 30 September 2023 ("FY23").
Financial overview
2023 2022 Change
Revenue GBP733.8m GBP749.2m -2%
Gross margin 46.3% 46.7% -40bps
Adjusted profit before
tax(1) GBP120.1m GBP135.7m -11%
Profit/(Loss) before tax GBP(10.9)m GBP83.2m -113%
Adjusted basic earnings
per share(1) 23.3p 26.6p -12%
Basic earnings per share (7.1)p 16.1p -144%
Dividend:
Proposed final 9.80p 9.50p +3%
Total for year 12.20p 11.75p +4%
Cash conversion(1) 74.0% 92.7% -1900bps
Net cash(2) GBP23.6m GBP71.9m -67.2%
Group highlights
-- Strategic progress, client wins and efficiency drive
mitigation of challenging market backdrop:
-- New business wins and strong retention across all divisions
and in a range of end markets, including aviation, e-commerce,
engineering, manufacturing, government/defence, mining, software
and technology
-- Continuing successful focus on higher growth segments
delivered GBP20m of incremental revenue (FY22: GBP5m), notably
TrainAI (data services), eLearning, Linguistic Validation and
Patent Attorney initiatives
-- As announced in June 2023, delivered a run rate GBP25m cost
savings to support FY24 profitability whilst investing in growth
initiatives
-- Invested GBP40m in capex in line with our strategy to drive
growth levers and deliver transformation
-- Increasing proportion of work going through our AI-enabled
Language eXperience Delivery platform ("LXD")
-- Integration of Propylon, content management business acquired
in July, on track and progressing well
Financial performance
-- Reported revenue declined by c.2% year-on-year and organic
constant currency ("OCC")(3) revenue by c.6%, reflecting reduced
client activity in a challenging market environment
-- As anticipated, OCC revenue decline slowed from c.7% in the
first half to c.5% in the second half, with improving trends across
our services divisions
-- Gross margin broadly maintained at 46.3% (FY22: 46.7%),
reflecting price recovery of rising costs and efficiency benefits
from greater use of LXD, partially offset by some changes in
language and client mix
-- Adjusted profit before tax ("Adjusted PBT")(1) declined 12%,
reflecting reduced activity in some end markets, offset by in-year
cost savings achieved and the benefits of our foreign exchange
hedging programme
-- Adjusted PBT(1) margin of 16.4%, down from 18.1% in FY22,
after investments in growth initiatives and transformation
-- Macroeconomic challenges and higher cost of capital through
increased market interest rates resulted in a non-cash exceptional
goodwill impairment charge of GBP62.4m against our technology
division which contributed to a reported loss before tax of
GBP10.9m
-- Other principal adjusting items, consistent with prior year,
included amortisation of acquired intangibles of GBP38.8m (FY22:
GBP34.4m) and exceptional items relating to restructuring and
integration of GBP22.6m (FY22: GBP12.5m)
-- Continued strong underlying cash generation, with 74% cash
conversion(1) (lower figure driven primarily by the timing of tax
payments and continued investment in our R&D and Group
transformation programmes)
-- Net cash(2) of c.GBP23.6m at 30 September 2023 (FY22:
GBP71.9m), after GBP46.3m of dividends, GBP31.5m of acquisition
costs, GBP19.4m of share repurchases and GBP40.3m of capex
-- Recommended final dividend of 9.80p per share (FY22: 9.50p),
giving total dividend of 12.20p (FY22: 11.75p), a 4% increase
Language Services
-- Revenues of GBP329.8m declined by 4% on a reported basis
(FY22: GBP342.1m) and by 7% on an OCC(3) basis, driven by reduced
activity as clients adjusted to more challenging conditions in
their own markets
-- Won all retender processes with global technology clients
-- Client retention and satisfaction remained high, with TrainAI
and eLearning growth initiatives both performing well, providing
momentum into FY24
IP Services
-- Revenues of GBP104.8m declined 2% on a reported basis (FY22:
GBP107.2m) and by 4% on an OCC(3) basis, driven by reductions in
client activity
-- Volumes recovered in the second half, as anticipated, as the
launch of the Unitary Patent on 1 June 2023 resulted in the release
of some of the backlog of IP work
-- Strong performance in both the Patent Attorney and Worldfile segments
Regulated Industries
-- Revenues of GBP162.5m declined by 6% on a reported basis
(FY22: GBP173.0m) and by 9% on an OCC (3) basis
-- Positive progress with Linguistic Validation (clinical stage)
offset by reduced activity at the regulatory stage amongst some
Life Sciences clients; we expect volumes to increase as products
move through to the regulatory approval and launch stages in due
course
-- The Financial and Legal Services segments performed well,
driven by Financial Services clients ensuring compliance with
PRIIPS regulations
Language and Content Technology
-- Revenues of GBP136.7m increased by 8% on a reported basis
(FY22: GBP126.9m) and decreased 1% on an OCC(3) basis
-- Encouraging new client wins across the products, with strong
second half bookings for Language Weaver (linguistic AI), including
its largest ever cloud SaaS contract, worth more than $1m over
three years
-- SaaS licence revenue growth of 23% which became a tailwind
for the Group on a run rate basis in the second half, delivering a
more predictable revenue profile for the division
Current trading and outlook
-- As previously announced, the macroeconomic environment
remains challenging with several temporary headwinds, however we
are also seeing opportunities for the Group to strengthen
leadership in our markets, particularly in AI-enabled solutions
-- Benefit of GBP25m cost actions and efficiency improvements to support profitability in FY24
-- Developments in AI and Large Language Models are creating
clear growth opportunities for the Group; the positive response to
the beta launch of Evolve, Language Weaver's pioneering linguistic
AI innovation, in November further cements our strong position in
helping clients safely harness the benefits of AI
-- In October we announced the acquisition of ST Communications,
a long-term language partner of RWS, which has given us a presence
in Africa and significantly deepened our expertise in more than 40
African languages
-- In line with our capital allocation policy, the share
repurchase programme, announced in June, is progressing as
planned
-- Overall, trading in the current year has been in line with the Board's expectations
Ian El-Mokadem, CEO of RWS, commented:
"Against a backdrop of ongoing global uncertainty, we made
positive progress with our medium-term strategy during FY23. Our
growth initiatives are contributing meaningful incremental revenue
and we reinforced our partnerships with several global technology
clients through successful outcomes in all significant retenders.
With the acquisition of Propylon and, shortly after the year end,
ST Communications, we have enhanced the Group's offerings,
capabilities and geographical reach.
"This progress has partially mitigated the impact of a
challenging market environment which has led to reduced activity in
several end markets and ongoing price pressure. Nevertheless,
retention levels remained high, we won new clients and we remain
confident that activity levels will recover as our clients' markets
normalise. We took effective action to ensure that our cost base
matches current levels of activity and we continue to identify
further efficiency opportunities in our transformation programmes,
whilst investing to support our growth initiatives.
"At our AI and Technology Teach-In in October we demonstrated
our longstanding expertise and capability and, in line with our
strategy, we continued to invest in AI during the year, including
the successful launch of the TrainAI proposition, the incorporation
of several AI features into Trados and increasing its use in our
production platform, the LXD. The recent launch of Evolve, a unique
combination of human and artificial intelligence, has the potential
to revolutionise translation processes by significantly reducing
the time it takes to achieve near human quality output.
"Notwithstanding the temporary headwinds in some of our markets,
the Group remains highly resilient. We have a compelling range of
AI-enabled solutions with the enterprise-grade security, quality
and privacy that clients are actively seeking and we are
successfully pivoting into higher growth segments, which is
supporting improving trends across all our services divisions. We
continue to transform the Group into a scalable platform to support
growth and profitability.
"Our global scale and reach and diverse portfolio of solutions,
clients and end markets are complemented by a unique combination of
market-leading expertise and technology. With clear structural
drivers of demand for our products and services and a strong
balance sheet and cash generation supporting investment in organic
and acquisition opportunities, we are confident in the long-term
prospects of the Group."
RWS Holdings plc
Ian El-Mokadem, Chief Executive Officer
Candida Davies, Chief Financial Officer 01753 480200
MHP (Financial PR Advisor) rws@mhpc.com
Katie Hunt / Eleni Menikou / Catherine Chapman 020 3128 8100
07884 494112
Numis (Nomad & Joint Broker)
Stuart Skinner / Kevin Cruickshank / Will Baunton 020 7260 1000
Berenberg (Joint Broker)
Ben Wright / Toby Flaux / Alix Mecklenburg-Solodkoff 020 3207 7800
The person responsible for releasing this announcement is Jane
Hyde, General Counsel and Company Secretary.
About RWS:
RWS Holdings plc is a unique, world-leading provider of
technology-enabled language, content and intellectual property
services. Through content transformation and multilingual data
analysis, our combination of AI-enabled technology and human
expertise helps our clients to grow by ensuring they are understood
anywhere, in any language.
Our purpose is unlocking global understanding. By combining
cultural understanding, client understanding and technical
understanding, our services and technology assist our clients to
acquire and retain customers, deliver engaging user experiences,
maintain compliance and gain actionable insights into their data
and content.
Over the past 20 years we've been evolving our own AI solutions
as well as helping clients to explore, build and use multilingual
AI applications. With 40+ AI-related patents and more than 100
peer-reviewed papers, we have the experience and expertise to
support clients on their AI journey.
We work with over 80% of the world's top 100 brands, more than
three-quarters of Fortune's 20 'Most Admired Companies' and almost
all of the top pharmaceutical companies, investment banks, law
firms and patent filers. Our client base spans Europe, Asia
Pacific, Africa and North and South America. Our 65+ global
locations across five continents service clients in the automotive,
chemical, financial, legal, medical, pharmaceutical, technology and
telecommunications sectors.
Founded in 1958, RWS is headquartered in the UK and publicly
listed on AIM, the London Stock Exchange regulated market
(RWS.L).
For further information, please visit: www.rws.com .
Forward-looking statements
This announcement contains certain statements that are
forward-looking. These include statements regarding our intentions,
beliefs or current expectations and those of our officers,
Directors and employees concerning, amongst other things, our
results of operations, financial condition, liquidity, prospects,
growth, strategies and the business we operate. By their nature,
these statements involve uncertainty since future events and
circumstances can cause results and developments to differ
materially from those anticipated. The forward-looking statements
reflect knowledge and information available at the date of
preparation of this document and, unless otherwise required by
applicable law, RWS undertakes no obligation to update or review
these forward-looking statements. Nothing in this announcement
should be construed as a profit forecast. RWS and its Directors
accept no liability to third parties in respect of this document
save as would arise under English law.
1. RWS uses adjusted results as key performance indicators as
the directors believe these provide a more consistent measure of
operating performance. The definitions for these key performance
indicators can be found in the Glossary.
2. Net cash comprises cash and cash equivalents less loans but
before deducting lease liabilities.
3. OCC: adjusted to reflect a like-for-like comparison between
actual and prior year and assumes constant currency across both
reported periods.
CHAIRMAN'S STATEMENT
INTRODUCTION
RWS continued to implement its medium-term strategy during FY23,
pivoting successfully into higher growth segments, making progress
in its transformation programme and building on its longstanding
capability to further deploy AI into its products and operations.
The Group operates in attractive markets with a combined global
size estimated at more than GBP47bn(1) and a strong set of demand
drivers. RWS's specialist knowledge and experience across all
aspects of the content life cycle enable the Group to meet a broad
range of client needs in multiple end markets. The Group's scale,
reputation and highly diversified client base have helped it to
maintain leading positions in a range of highly fragmented
markets.
PERFORMANCE
The Group delivered GBP733.8m of revenue for the year, a decline
of approximately 2% compared with the prior year (FY22: GBP749.2m).
This reflected a continuing challenging economic environment, which
resulted in reduced activity in a number of our end markets. While
we have taken action to ensure that our cost base matches current
levels of activity, we remain confident that activity levels will
recover in due course. RWS continued to demonstrate considerable
resilience, highlighting the defensive qualities of a business that
is well-diversified across end markets, geographies and the
solutions that it provides.
The Group recorded a loss before tax of GBP10.9m (FY22: profit
of GBP83.2m), largely due to impairment charges of GBP62.4m.
Adjusted profit before tax declined to GBP120.1m (FY22: GBP135.7m),
reflecting reduced revenues and planned investments in growth and
transformation. These have been partly mitigated by client price
increases, foreign exchange gains of GBP13.0m from the Group's
hedging programme and effective cost control, in particular the
implementation of significant cost actions announced at the half
year and the further migration of translation volumes through the
Language eXperience Delivery ("LXD"), our production platform.
The Group continues to have a strong balance sheet, with net
assets of GBP987.3m (FY22: GBP1,141.7m) at 30 September 2023 which
included net cash of GBP23.6m (FY22: GBP71.9m). The reduction in
net assets reflects impairment charges of GBP62.4m and decreasing
foreign currency denominated net assets by GBP60.3m, mainly due to
the weakening US Dollar.
PEOPLE AND BOARD
At 30 September 2023 RWS employed 7,910 full-time equivalents
across 67 locations in 33 countries (FY22: 7,761). Our agile
working policy facilitated a mix of regular face-to-face contact to
support effective collaboration with the advantage of the benefits
of technology in delivering time and energy savings from a
reduction in commuting. With cost-of-living concerns in many of our
locations, the Group's positive approach to flexible working has
been appreciated by colleagues across the world. We continued to
consider the viability of some of our locations and were able to
further reduce the number of offices by c.7%, with associated
savings in property and related costs.
Against a difficult macroeconomic environment background, it has
been a challenging year for the Group and I would like to
recognise, on behalf of the Board, the significant efforts by all
our teams across the world in continuing to deliver high quality
services and products to our clients. During the year the Group
continued to support those colleagues impacted by the ongoing
conflict in Ukraine. In February, following the earthquake in
Türkiye and Syria, we immediately provided additional support to
our home-based team members and their families in Türkiye. The RWS
Foundation made donations of GBP13,000 to the humanitarian appeal
and colleague donations raised more than GBP7,500. After the year
end, in light of the conflict in the Middle East, we moved quickly
to provide additional support for colleagues in our Lebanon
office.
Candida Davies was appointed the Group's Chief Financial Officer
and joined the Board at the start of the financial year on 3
October 2022. She brings deep expertise in finance, strategy and
business transformation and a wealth of international experience in
executing and integrating significant corporate transactions. In
order to ensure a smooth handover of responsibilities, Candida
worked closely with Rod Day, who continued as a member of the Board
and as Deputy Chief Financial Officer until 31 December 2022 when,
as planned, he left the Group. I would like to thank Rod for the
significant contribution he made during his year with the
Group.
On 3 October 2022 Jane Hyde joined the Executive Team as General
Counsel and Company Secretary, taking overall responsibility for
the Group's legal, governance and risk functions. She has an
outstanding record in advising public companies and has held a mix
of private practice and in-house general counsel roles alongside
commercial and compliance roles in international organisations,
including De La Rue plc, JPMorgan Cazenove and Nomura
International. The Group's legal team now reports directly to Jane.
She also leads the company secretarial and risk management
activities for the Group.
On 2 October 2023, Andrew Brode stepped down as Chairman. Andrew
has been fundamental to RWS's success since leading a buyout in
1995 and has overseen a series of significant milestones, from
listing the Group on AIM in 2003 to overseeing significant growth
in revenues and profits, driven both by the underlying business and
a series of acquisitions. I would like to thank Andrew for his
dedication to the Group, without which we would not have achieved
our market-leading position. The Board, and everyone at RWS, owes
Andrew a huge debt of gratitude for his contribution over many
years and we look forward to continuing to benefit from his wise
counsel as a Non-executive Director.
SUSTAINABILITY AND ESG
RWS remains fully committed to achieving the highest standards
in Environmental, Social and Governance ("ESG") in its business
activities and interactions with stakeholders. We made further
progress during the year towards becoming a truly sustainable
business and for the second year we have published a separate ESG
report, which sets out our progress in detail. The report is
available to download from the Group's website
www.rws.com/about/corporate-sustainability/.
DIVID
The Group continues to deliver its progressive dividend policy
and this marks the 20th year in succession that we have increased
the dividend. The Group remains highly cash generative and,
notwithstanding our share repurchase and investment programmes,
both of which will last into FY24, we will continue to deliver high
levels of cash conversion.
The Board therefore recommends a final dividend of 9.8p per
share. Together with the interim dividend of 2.4p per share, this
will result in a total dividend of 12.2p for the year, an increase
of 4% compared with FY22. Subject to final approval at the AGM, the
final dividend will be paid on 23 February to shareholders on the
register at 26 January 2024.
SUMMARY
The Group has continued to make solid progress in delivering its
medium-term strategy, particularly in relation to its growth
initiatives, transformation programmes and portfolio expansion.
This progress has helped to mitigate some of the effects of a
challenging market environment, which has dampened demand and
increased price pressure in some of our end verticals in the last
12 months.
We are well-positioned to take advantage of developments in AI
and technology and the long-term drivers of demand for our products
and services are clear. We are leaders in the majority of markets
that we serve and are confident of the opportunities for growth.
The Group remains highly cash generative and has a strong balance
sheet.
With our global reach, diverse set of end markets and high
levels of client retention and satisfaction, I am confident in the
Group's long-term prospects. I would like to thank Andrew for his
support during my first 18 months with RWS and I look forward to
working with him and the rest of the Board as we continue to
deliver on our strategy.
Julie Southern
CHAIRMAN
11 December 2023
(1) Sources: OC&C, Slator, CSA, WIPO, EPO, Companies House (2021)
CHIEF EXECUTIVE OFFICER'S REVIEW
INTRODUCTION
We have made steady progress with our medium-term strategy
against a backdrop of ongoing global uncertainty. We are delivering
incremental revenue from our growth initiatives, winning new logos
and achieving more efficient delivery of services through our
Language eXperience Delivery platform. This progress has partially
mitigated the impact of a challenging market environment which has
led to reduced activity in several end markets.
Our clients come first and we are proud to continue to have high
retention rates and see further improvements to our Net Promoter
Score. As we look ahead to the coming year and beyond, we will
continue to invest in our AI-powered products and services and help
guide clients through their own AI journey.
PROGRESS IN RELATION TO OUR MEDIUM-TERM STRATEGY
In 2022 we launched a new Group strategy and plan for the next
phase of the Group's development. Eighteen months later our
strategy remains robust and valid and the Group continues to make
solid progress.
We continue to be confident in the structural drivers of demand
for our products and services and the strength of the solutions
that we provide. This is demonstrated by the encouraging number of
new business wins in the period across all divisions, high levels
of retention and satisfaction across our existing client base and
the positive outcomes from several tender processes involving our
largest enterprise clients.
Our growth initiatives, including Linguistic Validation and
eLearning, have continued to build well and our data services
proposition, TrainAI, was well received when it launched in
February, with some encouraging client wins in the early part of
the second half. This progress has helped to mitigate some of the
effects of a challenging environment which has resulted in reduced
activity in a number of our end markets.
The actions we took throughout the year to improve efficiency
and maintain profitability have helped to protect margin -
particularly the cost actions that we announced at our interim
results. We saw some progress in pricing (particularly within our
Language and Content Technology division), our transformation
programmes and expanding our portfolio.
In July we completed the acquisition of Propylon Holdings
Limited ("Propylon"), a content management technology business
headquartered in Dublin, Ireland. Propylon's component content
management system is used by governments, standards bodies, legal
publishers and regulated firms to address the complexities involved
with drafting, managing, publishing and updating legal and
legislative content. Shortly after the end of FY23 we announced the
acquisition of ST Communications, a long-term language partner of
RWS, which has given us a presence in Africa and access to
significant expertise in more than 40 African languages.
Integration of both businesses has started well and is proceeding
to plan.
Our strategy identified technology and AI as being critical to
our future and the explosion in generative AI and Large Language
Models ("LLMs") has reinforced that view. Our longstanding AI
capabilities date back to 2003, and ever since we have been
pioneering in neural machine translation, AI data services and
AI-functionality in our Tridion and Trados products. Our continued
investments and the rapid development in AI and LLMs place us in a
strong position to benefit internally from AI and create clear
growth opportunities for the Group.
During the year we invested in improving our sales
effectiveness. Following a successful pilot within IP Services we
extended the programme to other divisions, with a focus on
implementing more rigorous processes around sales activity and
accountability. We also reviewed and sharpened our approach to
account management, introducing a single Group-wide approach to
account planning and development. This will support our
cross-selling efforts as we look to provide more of our solutions
to our largest clients.
In line with our medium-term strategy we continue to invest in
our transformation. In January we successfully migrated to a single
collaboration platform, giving the Group an enhanced ability to
communicate and work together more effectively. We have also made
progress in HR and Finance transformation, with the first phase of
our new HR platform having gone live in early December 2023.
Shortly after the end of the year we implemented the first phase of
the new finance operating model, including shared service centres
in Brno (Czechia), Bangalore (India) and Shenzhen (China).
The transformation of our IP Services division has also
progressed well. The division's translation operations team became
part of the Language eXperience Delivery ("LXD") platform and
shortly after the year end the LXD started to process IP Services
content. We have also consolidated our vendor data and contracts,
generating savings for the Group.
AI AT RWS
At RWS, we have been AI pioneers for many years. Since first
launching statistical machine translation in 2003 and later
developing one of the world's most advanced neural machine
translation platforms, our expert linguists and elite scientists
have continued to redefine the limits of machine translation. Since
2016, we've been a trusted data training and services partner to
the world's leading tech companies on their AI development,
providing the linguistic expertise, cultural insight and quality
data that power their success. Whether clients are exploring,
building or using AI, we have AI solutions and AI-enabled products
to support them on their AI journey.
Our strategy recognises the role of AI and technology in driving
growth and efficiency - both for our clients and for our internal
deployment.
Our LXD platform, which provides clients with access to more
than 1,750 in-house language specialists and more than 35,000
freelancers, relies on our AI-powered technologies, including
Language Weaver and Trados, to deliver further improvements in our
services. Almost two-thirds of all words translated by the LXD are
translated first by Language Weaver, our AI-powered neural machine
translation platform.
PEOPLE, CULTURE AND ORGANISATION
RWS remains a great place to work and we are proud to have
nurtured an inclusive and diverse environment where everyone has
the opportunity to be their best and be part of a global team.
In a challenging environment, a clear focus is more important
than ever and the business has adopted the acronym EDGE to ensure
that all colleagues are clear about the Group's priorities. EDGE
stands for Efficient Delivery, Growth and Engagement. Our cadence
of communications provides context, rationale and examples that
bring each of these three components to life, from our CEO-led
communications and our monthly company newsletter, to updates about
our transformation programmes and via the regular town hall events
that take place across divisions and functions.
A major part of developing our culture and fostering an
inclusive environment is our annual Group-wide Engagement Survey.
This year marked the third year in which we have asked all
colleagues for insight into their experience at RWS, looking at
what's working well and what can be improved with regard to
collaboration, engagement, inclusion, growth and development,
leadership and living the Group's values. This year's survey
achieved a response rate of 84% (FY22: 85%) and a 61% (FY22: 69%)
favourable colleague engagement score. We fully recognise that the
external challenges we experienced in FY23 and the difficult
decisions we had to take in response have impacted our overall
colleague engagement score. However we have confidence that we can
make positive progress in the year ahead. Encouragingly our highest
scoring area was Trust and Respect (83% favourable), alongside our
diverse culture, relationships with managers and corporate
sustainability. In parallel, I am pleased to report a further
improvement in our voluntary colleague attrition rate(2) to 11.9%
for the year (FY22: 15.9%).
To further encourage colleagues to adopt our values and
demonstrate their relevance, this year we launched our 'Ambassador
Awards' which is our all-colleague recognition programme. Twice a
year each of our divisions, the LXD and our Group functions
nominate one colleague or team as their best example of each of the
four values. These 24 half-year winners received a financial reward
and their stories are published and promoted internally to
recognise their exceptional contribution. This programme proved
extremely popular and we received more than 750 entries during the
year.
A regular rhythm of company communications to all colleagues,
where we provide updates on client and team successes,
organisational changes and product launches, are complemented by a
monthly all colleague newsletter.
In January 2023 we undertook a significant information
technology migration project, giving everyone across the business
the ability to communicate effectively and share information on a
single instance of Microsoft Teams and Outlook. We also implemented
Viva Engage, a social channel, where all colleagues can now easily
share content and join discussions across the Group.
Our eLearning platform MyLX has continued to provide colleagues
with learning and development opportunities. MyLX offers a
comprehensive range of more than 360,000 training modules provided
by Skillsoft, giving everyone the opportunity to improve their
skills and personal development. The platform also allowed us to
roll out training in our Code of Conduct, a new information
security module and, for the first time, our global health and
safety programme. At the end of the year we had a 98% completion
rate for all compliance training across the Group.
In June we again brought together our Senior Leadership Team in
the UK to remind ourselves of our organisational purpose and values
and to review and assess progress on our medium-term strategy. This
aims to align our most senior team with our organisational goals
before bringing everything to life throughout the business under
this group's combined leadership.
We appointed Daniel Bennett as President of our IP Services
division on 10 November 2022, overseeing the Group's full suite of
innovation lifecycle management services, including patent
translation and filing, renewals and IP research studies. We
announced on 28 September 2023 that Daniel would be leaving the
business to pursue other opportunities. Daniel has been
instrumental in driving the success of IP Services over the past
year by navigating the team through the launch of the Unitary
Patent, fostering a more growth-oriented culture and realigning the
IP leadership team.
With Andrew Brode stepping back from Chairman to become a
Non-executive Director, I would like to thank him personally for
the significant support he has given me during my first two years
as CEO of the Group and very much look forward to continuing to
benefit from his wise counsel.
OPERATING REVIEW
Language Services
Client retention and satisfaction remain high, several
successful tender processes and growth initiatives performing well,
offset by reduced activity
The Language Services division represented 45% of Group revenues
in the year (FY22: 46%). Revenues of GBP329.8m were 3.6% lower year
on year on a reported basis (FY22: GBP342.1m) and saw a 7% decrease
on an organic constant currency basis.
We are proud that client retention and satisfaction remained
high and we were encouraged by positive outcomes following tender
processes with several of our global technology clients, albeit we
continued to see reduced activity from some clients as they
adjusted to more challenging conditions in their own markets.
The Strategic Solutions Group continued to win new clients in
both the Major Accounts and GoGlobal segments, including Norse
Atlantic Airways, for whom we have recently delivered multilingual
booking websites and online experiences across any device or
channel, using a combination of our language services expertise and
our Tridion solution.
In our Enterprise Internationalisation Group ("EIG"), which
serves global technology enterprises, we were encouraged to have
completed a three-year contract renewal for one of our largest
clients in the first half and, in the early months of the second
half, were pleased by the positive outcomes of other tender
processes. Clients within the EIG consistently provide high NPS
scores and ratings (particularly in 'partnering' and 'delivering')
and continue to be delighted with the services and solutions we
provide.
With regards to the division's growth initiatives, eLearning
performed well throughout the year and we have seen some success in
cross-selling the solution to clients in the Regulated Industries
division. In February we launched TrainAI, a refreshed proposition
focused on the range of data services that we have been providing
to several of our largest technology clients since 2016. This is
focused on helping organisations ensure that their own AI models
are trained with dependable and responsible data and encompasses
data collection, annotation and validation services. The service is
backed by a global community of more than 100,000 annotators and
linguists.
We have been encouraged by the market's reception to TrainAI and
the sales and marketing drive which is supporting the launch led to
some wins early in the second half. Four of our major clients have
approved us to train data for the next stage of their AI
programmes, giving a strong expectation of further momentum. These
programmes will provide us with strong references amongst the data
services buyer landscape and are expected to lead to growth in this
developing area.
We were also pleased to complete the beta launch of HAI, a
product within GoGlobal, which will enable clients with ad-hoc
translation requests to upload documentation for rapid translation.
We anticipate the full launch of HAI in early 2024.
The division's adjusted operating profit(3) was GBP39.4m (FY22:
GBP53.3m) on a reported basis, reflecting the reduction in top-line
revenues and unfavourable language and client mix, partially
mitigated by effective cost control.
Regulated Industries
Linguistic Validation growth initiative performing well, reduced
activity among certain clients in life sciences, while financial
services experienced solid revenues, largely driven by regulatory
changes
The Regulated Industries division accounted for 22% of Group
revenues in the year (FY22: 23%). Revenues of GBP162.5m decreased
by 6.1% year on year on a reported basis (FY22: GBP173.0m) and
decreased by 9% on an organic constant currency basis.
Several life sciences clients continue to show softness due to
the impact of new legislation in the USA, such as the Inflation
Reduction Act, on product pipelines and due to delays at regulatory
authorities; however, we expect volumes to increase as bottlenecks
resolve and as products move through the regulatory approval
process in due course. Revenues were also impacted year-on-year by
the loss of a major Contract Research Organisation ("CRO")
client.
In the Life Sciences vertical our focus on clinical operations
has brought positive progress. The continued strength of our
Linguistic Validation ("LV") proposition supported our pivot to
clinical work and has resulted in multiple wins, including a
significant programme with a top 5 pharmaceutical company. Building
on our LV strength, we have introduced technology-enabled
solutions, such as our new electronic Certificate of Display
Equivalence ("eCoDE") Comparison tool. The eCoDE tool will
revolutionise the electronic Clinical Outcome Assessment ("eCOA")
screen review process using AI, increasing accuracy and further
reducing timelines for eCOA projects.
We continue to participate in the Critical Path Institute's eCOA
Consortium to help drive the science, best practice and adoption of
eCOA within clinical trials. An eCOA replaces the traditional
paper-based approach to collecting patient results and feedback in
clinical trials and studies.
The growth in patient recruitment services has also contributed
to progress in the clinical space with significant new wins. We
expect this will be an area of continued expansion going forward
and we have continued to leverage our relationships with major
global pharmaceutical clients to expand in the APAC region, an area
with high growth potential.
We have secured a major programme awarded for pharmacovigilance
at a leading CRO as well as a top German pharma company. We also
secured a world-renowned hospital systems provider as a new major
client, reflecting our continued leadership in the healthcare
space.
In the financial and legal services vertical, we saw solid
revenues driven by Packaged Retail Investment and Insurance
Products ("PRIIPS") regulatory requirements. We won several new
clients, including a major European retail bank and a key
investment banking client. We also saw expansion with some existing
clients, including a large programme with a European general
insurance provider. We are extending our technology offering in
financial services to expand our footprint and increase client
retention in the vertical.
The division's adjusted operating profit(3) decreased 27.5% to
GBP22.9m (FY22: GBP31.6m) on a reported basis. This reflected the
reduction in top-line revenue and the impact of the loss of the CRO
client, partially mitigated by cost actions through the year.
Language and Content Technology
Encouraging new client wins across portfolio, proportion of
annual technology licences revenue continues to grow
The Language and Content Technology ("L&CT") division
accounted for 19% of Group revenues in the year (FY22: 17%).
Revenues of GBP136.7m were 7.7% higher year on year on a reported
basis (FY22: GBP126.9m) and saw a 1% decrease on an organic
constant currency basis.
In FY22 we appointed general managers to have full ownership and
accountability for four principal product areas - Language Weaver,
Trados, Tridion/Fonto and Contenta - which drove a more focused
approach. The division's growth plan resulted in a refined
go-to-market model for each product, and we are pleased with the
progress made across all product areas.
We have had some encouraging new client wins, with Language
Weaver continuing to make good progress with strong second half
bookings, including its largest ever Cloud SaaS contract, worth
more than a million dollars over three years. Overall, SaaS
revenues as a proportion of annual technology licences revenue
continued to grow. The cumulative benefit from this transition over
recent years is now a tailwind and is delivering, as intended, a
more predictable revenue profile for the division in the
future.
We are also pleased to have launched a new version of Trados in
July, alongside a number of new features and functionality to help
language specialists and localisation teams be more productive. We
saw encouraging momentum for SaaS versions of Trados with bookings
significantly increasing year-on-year. We experienced triple digit
growth in the principal activity indicators of Trados - number of
projects, files and words translated.
In July 2023 we announced the acquisition of Dublin-based
Propylon, a provider of content creation, management and publishing
solutions for the government, legal, assurance, audit and
publishing industries. The integration of Propylon is progressing
well and its platform joins RWS's portfolio of dedicated solutions
for aerospace and defence (Contenta), manufacturing, high-tech and
life sciences (Tridion Docs) and the market-leading XML editor
(Fonto).
In the second half, new Tridion releases (both the Sites and the
Docs versions of the product) contributed to further progress in
the division. Contenta also announced the launch of LiveContent 6.0
(the latest version of its LiveContent solution), a highly flexible
cloud-ready architecture for distribution management of technical
publications, technician feedback and analytical data insights.
At the end of the period, we delivered a significant up-sell of
two of our content technology products (Tridion and Fonto) to an
existing major client in life sciences and we continue to win new
logos across a range of end markets, including defence, government,
software and infrastructure.
The division's adjusted operating profit(3) was broadly flat at
GBP37.0m (FY22: GBP37.6m) on a reported basis, the higher
proportion of SaaS revenues and ongoing planned investments
offsetting the impact of higher top-line revenues.
IP Services
Successfully managed the impact of the Unitary Patent and
improved sales effectiveness, giving strong foundation for FY24
The IP Services division represented 14% of Group revenues in
the year (FY22: 14%). Revenues of GBP104.8m were 2.2% lower year on
year on a reported basis (FY22: GBP107.2m) and 4% lower on an
organic constant currency basis. Following the introduction of the
Unitary Patent ("UP") by the European Patent Office, the division
delivered 2% organic constant currency growth in Q4.
While revenues in FY23 were slightly down on the prior year,
mostly due to the delayed introduction of the UP until 1 June, this
was partially offset by strong growth in Worldfile revenue,
particularly in the first half of the year, and a rebounding of
Eurofile revenues during Q4.
We were encouraged by strong progress in one of our declared
growth initiatives, penetrating the Patent Attorneys market, and we
anticipate being able to build on several significant wins in
FY24.
Our Japan and China operations delivered mixed results during
FY23, with growth in the latter underpinned by a number of renewals
with large Chinese corporates. This was offset by weakness in our
Japan operations stemming from patent grant delays with a major
client.
The IP Research division experienced tougher trading during the
year, mostly due to a significant reduction in work with a key
client, however we saw several new business wins in the last
quarter that we anticipate to ramp up into FY24.
We strengthened the division's management team and we have
developed a clear roadmap for expansion into patent maintenance
activities. Additionally, investment has been put into initiating
our Leading for Growth programme, building on our account
management success and appointing regional heads of sales, aimed at
driving consistent sales leadership coaching and metrics across the
division and the acquisition of a number of global new logo
clients.
The division's adjusted operating profit(3) was GBP27.7m (FY22:
GBP30.1m) on a reported basis, reflecting the reduction in top-line
revenues together with planned investments in our business to
position us for future growth, partially offset by tight cost
control.
SUSTAINABILITY AND ESG
Sustainability is core to the way we operate. Our work for our
clients gives us a natural global perspective and deep
understanding of the impact of what we do. Over the past year we
have made significant progress in becoming One RWS where we:
-- understand we need to reduce our carbon footprint to ensure the future of the planet
-- are proud of our diversity and celebrate our cultural and
technical expertise, enabling us to share a deep understanding of
client industries and local cultures
-- strive to create a world where understanding is more universal for everyone
-- are focused on ensuring that combination of technology and
cultural expertise helps our clients grow by ensuring they are
understood anywhere
Significant progress has been achieved in each of our four
corporate sustainability pillars - our people, our community, our
environment and our governance - which remain at the centre of our
purpose to unlock global understanding.
Our 2023 engagement survey shows that 79% of colleagues believe
that RWS fosters environmentally friendly practices, 82% of
colleagues believe they can report unethical practices without fear
of negative consequences and 78% believe RWS is taking action to be
socially responsible.
Both directly and through The RWS Foundation, we have partnered
with a number of community organisations such as CLEAR Global, have
undertaken fundraising to support the people affected by the
devastating earthquakes in Türkiye and Syria and have progressed
our focus on education, partnering with over 700 universities and
sponsoring language students via the RWS-Brode Scholarship
programme.
We hold ourselves to high accountability standards. As a result
in FY22 we improved the accuracy of our carbon footprint by
improving our data collection and Greenhouse Gas ("GHG") emissions
to include both our operations and supply chain, and committed to
setting carbon reduction targets which are aligned with the Science
Based Targets initiative ("SBTi"). This was further improved in
FY23 and the new targets have been submitted to the SBTi for
validation and will be published once validated.
In April the Group successfully managed the impact of a cyber
incident after unauthorised access was gained to a legacy
application. The UK's Information Commissioner closed its
investigation into the breach in early May with no further
action.
We also proudly support the Ten Principles of the United Nations
Global Compact on human rights, labour, environment and
anti-corruption. We remain committed to making the UN Global
Compact and its principles part of the strategy, culture and
day-to-day operations of our Group and to engaging in collaborative
projects which advance the broader development goals of the United
Nations, particularly the Sustainable Development Goals.
We are proud of the accomplishments to date, none of which would
have been possible without the unwavering dedication of our
colleagues around the globe. To understand and respond to our
clients' needs, we believe it is imperative to employ a workforce
which reflects the many communities to which we provide
services.
CURRENT TRADING AND OUTLOOK
A challenging economic outlook and wider global economic
uncertainty has seen reduced activity from many clients across
several end markets. However we are confident that volumes will
return in due course, given the five core demand drivers in our
market. In particular, growth in AI and the continued explosion of
content will give us opportunities.
Progress against our medium-term strategy is working. We are
pivoting into higher growth segments via our growth initiatives,
investing in transformation and developing our portfolio.
We will continue to focus on ensuring efficient delivery across
all parts of the Group. To further support our focus on cost
efficiency, no change will be made to base salary levels for
Executive Directors and our senior leadership team. Where salary
increases are awarded, these will be focused on our lowest paid
colleagues.
We are clear that AI is not a headwind, and instead provides an
opportunity for both us and our clients. As illustrated at our AI
and Technology Teach-In in October, we believe that developments in
AI have been positive for RWS and will continue to support our
growth and efficiency in FY24 and beyond. We were also pleased to
have announced in November 2023 the beta launch of Evolve, a new
capability within Language Weaver that enables almost human-like
quality in our machine translation output.
As we look to the future, our people, scale, geographic reach
and advanced AI-powered technologies and services, put us in a
strong position to further strengthen our leadership in the
market.
Ian El-Mokadem
CHIEF EXECUTIVE OFFICER
11 December 2023
2 Calculated as number of FTE leavers during the financial year,
divided by average number of FTEs during the year, noting the
constraints imposed by having multiple HR systems.
3 Adjusted operating profit is stated before amortisation and
impairment of acquired intangibles, acquisition costs, share-based
payments expense and exceptional items. See Note 4
CHIEF FINANCIAL OFFICER'S REVIEW
INTRODUCTION
The Group has made significant progress during 2023 with
management initiatives to improve efficiency and maintain
profitability. The Group has added to its technology portfolio with
the acquisition of Propylon, managed to maintain strong cash
generation during the period despite a continuing challenging
market environment and initiated its first share repurchase
programme. The Group's transformation programme sets a strong
platform for further progress in 2024 and beyond.
During 2023 total revenue declined by 2%, adjusted operating
profit by 11%, and adjusted profit before tax by 11%. Despite the
challenging macroeconomic environment, our key growth levers, such
as Linguistic Validation, eLearning and TrainAI have performed well
and we continue to invest behind these levers to drive future
growth. We are also investing to transform our back office
efficiency to better leverage scale. We are encouraged by the
ongoing opportunities for efficiency gains through the use of AI
and our cost-reduction programmes which aim to mitigate the impact
of cost inflation. The Group continued to enhance its portfolio
with the acquisition of Propylon Holdings Limited, whose content
management system is used by governments, standards bodies, legal
publishers and regulated firms.
The Group continues to be highly cash generative, with cash
generated from operations of GBP107.5m during the period,
notwithstanding acquisitions and costs associated with
restructuring and integration. Net cash excluding lease liabilities
declined in the period from GBP71.9m to GBP23.6m, reflecting the
consideration paid for acquisitions of GBP31.5m and a further
GBP19.4m paid for the share repurchase programme.
Reflecting the macro challenges in the last year and the higher
cost of capital through increasing market interest rates, an
impairment charge of GBP62.4m has been recognised in the period
relating to goodwill in respect of the Group's Language and Content
Technology division.
REVENUE
Overall in FY23 the Group generated revenues of GBP733.8m, which
is 2% lower than FY22. This was due to the impact of challenging
economic conditions and reduced activity in our end markets, partly
offset by GBP13m of benefits from our foreign exchange hedging
programme and a stronger average US Dollar rate in the period which
supported revenues in local sterling currency. On an organic
constant currency ("OCC") basis revenues are 6% lower than those
achieved in FY22.
In divisional terms, Language Services recorded GBP329.8m in
revenue, a 4% decrease in total revenue and 7% on an OCC basis.
Client retention and satisfaction remain high, albeit we continue
to see reduced volume from certain clients in some end markets as
they adjust to more challenging conditions. The TrainAI and
eLearning growth initiatives both performed well and provide
momentum going forwards. Regulated Industries recorded GBP162.5m in
revenue, a decrease of 6%, although a decline of 9% on an OCC basis
year-on-year. Positive progress has been made with Linguistic
Validation and, while some Life Sciences clients continued to
deliver reduced levels of activity, we expect volumes to increase
as more products move through regulatory approval. Language and
Content Technology had total revenue of GBP136.7m, an increase of
8% year on year and a decrease of 1% on an OCC basis. Reported
organic growth was 3% ahead of prior year. IP Services recorded
GBP104.8m in revenue, a decrease of 2% on prior year and 4% on an
OCC basis. The introduction of the Unitary Patent in June has
resulted in the release of some of the backlog of IP work,
providing momentum moving forwards.
The majority of the Group revenue, categorised by geography, is
in the US market, which accounts for 54% of the total. No one
client accounts for more than 10% of Group revenue.
GROSS PROFIT
Gross profit decreased by 3% to GBP339.5m, delivering a gross
margin of 46.3%, down slightly from 46.7% in the prior year.
Delivery of the significant cost actions announced in June is
nearing completion and we continue to identify further
opportunities for efficiency gains through our transformation
programmes, including by increasing the proportion of work
undertaken through our Language eXperience Delivery platform and
the use of artificial intelligence ("AI") internally.
ADMINISTRATIVE EXPENSES
Administrative expenses have increased to GBP346.4m (2022:
GBP263.9m). Administrative expenses as a percentage of revenue have
increased from 35% to 47%, which reflects the impact of the
impairment charge related to the Group's Language and Content
Technology CGU of GBP62.4m, together with the cost to achieve the
efficiency programmes implemented during the period. Adjusted
administrative expenses (gross profit less adjusted operating
profit) increased by GBP4.0m to GBP215.7m.
Amortisation of acquired intangibles was GBP38.8m (2022:
GBP34.4m). This included additional amortisation for Fonto and
Propylon intangible assets, together with the impact of exchange
rate movements during the period. Amortisation of non-acquired
intangibles was GBP18.1m (2022: GBP15.7m), reflecting an increase
in capitalised software development costs.
Exceptional costs of GBP22.6m were incurred during the year,
which includes GBP12.3m for restructuring and integration costs in
relation to the Group's cost reduction programme, GBP5.5m for Group
transformation costs and GBP4.8m related to legacy payments.
Acquisition costs of GBP5.1m were primarily related to the
contingent consideration and purchase of Propylon Holdings Limited
during the period and contingent consideration for the purchase of
Liones Holding B.V. in the prior period.
FINANCE COSTS
Net finance costs were GBP4.0m (2022: GBP3.1m), with the year-
on-year increase due primarily to an increase of GBP1.2m in
interest payable on external debt, reflecting higher interest rates
and increased borrowings. The Group has a US$220m Revolving Credit
Facility ("RCF") maturing on 3 August 2026, with an option to
extend maturity to 3 August 2027. This gives us further flexibility
as we continue to grow the business and seek selective acquisitions
to enhance the Group's capabilities and geographic reach.
PROFIT BEFORE TAX
The Group reported a loss before tax of GBP10.9m (2022: profit
of GBP83.2m), the decline having been driven by impairment charges,
lower revenues and client activity, together with increases in
exceptional charges related to the Group's cost reduction
initiative. These have been partially offset by foreign exchange
gains of GBP13.0m from our Group hedging programme and the release
of management bonuses during the period.
ADJUSTED PROFIT BEFORE TAX
Adjusted profit before tax ("Adjusted PBT") is stated before
amortisation and impairment of acquired intangibles, share-based
payment expense, acquisition costs and exceptional items. The Group
uses adjusted results as a key performance indicator, as the
Directors believe that these provide a more consistent and
meaningful measure of the Group's underlying performance across
financial periods. The Adjusted PBT of GBP120.1m (Adjusted PBT
margin: 16.4%) recorded in the period has decreased from GBP135.7m
(Adjusted PBT margin: 18.1%) in the prior year.
TAX CHARGE
The Group's tax charge for the year was GBP16.8m (2022:
GBP20.5m). The adjusted tax charge for the period was GBP29.6m
(2022: GBP32.1m) representing an effective adjusted tax rate of
24.6% compared with 23.7% in the prior financial year. The rise in
the effective rate largely reflects the increase in the UK tax rate
from 19% to 25% in April 2023 and, to a lesser extent, tax rates in
overseas countries which are higher than the UK tax rate.
EARNINGS PER SHARE AND DIVID
Basic earnings per share for the financial year decreased from
16.1p to (7.1)p, a decrease of 144%, while adjusted basic earnings
per share decreased from 26.6p to 23.3p, representing a decrease of
12%, which reflects the after tax impact of significant adjusting
items this financial year including the cost reduction and
transformation programmes. The weighted average number of ordinary
shares in issue for basic and adjusted basic earnings decreased
from 389.4m to 388.2m, principally due to the proportionate impact
of the ordinary shares repurchased through the share repurchase
programme.
A final dividend for the financial year ended 30 September 2023
of 9.8 pence per share has been proposed, equivalent to GBP37.4m,
while an interim dividend of 2.4 pence per share, equivalent to
GBP9.3m, was paid during the financial period. A final dividend for
the year ended 30 September 2022 of 9.5 pence per share, equivalent
to GBP36.8m, was paid in this financial period.
The proposed total dividend for the year of 12.2 pence per share
represents a 4% increase on the total dividend relative to the
prior financial period of 11.75 pence per share.
BALANCE SHEET AND WORKING CAPITAL
Net assets at 30 September 2023 decreased by GBP154.4m to
GBP987.3m. The main drivers of this decrease was the impairment of
goodwill of GBP62.4m and decreasing foreign currency denominated
net assets by GBP60.3m, mainly due to the weakening US Dollar.
Current assets at 30 September 2023 of GBP290.2m have decreased
by GBP35.7m on the prior financial year. This includes a decrease
in trade and other receivables of GBP8.2m and in cash and cash
equivalents balances of GBP25.0m to GBP76.2m.
Current liabilities have also decreased to GBP182.6m at 30
September 2023, a decrease of GBP21.0m, primarily due to a decrease
in trade and other payables balances of GBP15.8m. Non-current
liabilities have increased by GBP14.9m, reflecting a net increase
in loan balances under our RCF of GBP23.3m and an increase in
provisions of GBP4.8m, partly offset by a decrease in lease
liabilities of GBP11.3m, trade and other payables of GBP1.2m and
deferred tax of GBP0.7m.
CASH FLOW
Cash generated from operations was GBP129.2m, GBP19.6m less than
the prior year, when cash generated was GBP148.8m. Operating cash
flow before movements in working capital and provisions decreased
from GBP157.5m to GBP130.9m. The net working capital outflow of
GBP1.7m has decreased by GBP7.0m from the prior financial year's
outflow of GBP8.7m. This has been driven by improvement in working
capital management.
Significant cash outflows from investing activities included net
cash consideration for the acquisition of Propylon Holdings Limited
of GBP25.1m, contingent and deferred consideration of GBP6.4m for
prior period acquisitions of Iconic and Liones Holding B.V. and
purchases of intangible software of GBP36.5m.
The Group announced a share repurchase programme during the
period and has repurchased GBP19.4m of shares at the balance sheet
date. The programme is progressing as planned and is in line with
our capital allocation policy. Cash flows from other financing
activities included dividends paid within the financial year ended
30 September 2023 of GBP46.3m.
Cash balances at the financial year end amounted to GBP76.2m,
with external borrowings of GBP52.6m, excluding lease liabilities,
resulting in a net cash position of GBP23.6m (2022: GBP101.2m cash
and external borrowings of GBP29.3m, resulting in net cash of
GBP71.9m). Net debt including lease liabilities was GBP9.9m (2022:
net cash of GBP25.2m).
POST BALANCE SHEET EVENTS
On 3 October 2023 the Group acquired ST Comms Language
Specialists Proprietary Limited, a Cape Town based language
services provider. The acquisition has been funded from existing
cash resources and is in line with the Group's strategy to actively
pursue acquisitions that have the potential to accelerate delivery
of its medium-term plans.
The Group has continued its share repurchase programme and from
1 October 2023 to 8 December 2023 has purchased a further 6,252,443
shares at an average price of 234.3p per share.
Candida Davies
CHIEF FINANCIAL OFFICER
11 December 2023
Consolidated Statement of Comprehensive Income
for the year ended 30 September 2023
2023 2022
Note GBPm GBPm
Revenue 733.8 749.2
Cost of sales (394.3) (399.0)
-------- --------
Gross profit 339.5 350.2
Administrative expenses (346.4) (263.9)
-------- --------
Operating (loss)/ profit (6.9) 86.3
Analysed as:
Adjusted operating profit: 123.8 138.5
Amortisation of acquired intangibles (38.8) (34.4)
Impairment losses 9 (62.4) -
Acquisition costs (5.1) (2.1)
Share based payment expense (1.8) (3.2)
Exceptional items 5 (22.6) (12.5)
-------- --------
Operating (loss)/ profit (6.9) 86.3
Finance income 0.6 0.2
Amortisation of capitalised exceptional
finance costs 5 (0.3) (0.3)
Finance costs (4.3) (3.0)
-------- --------
(Loss)/ profit before tax (10.9) 83.2
Taxation 6 (16.8) (20.5)
-------- --------
(Loss)/ profit for the year attributable
to the owners of the Parent (27.7) 62.7
Other comprehensive (expense)/ income
Items that may be reclassified to profit
or loss:
(Loss)/ gain) on retranslation of quasi
equity loans (net of deferred tax) (1.9) 6.1
(Loss)/ gain on retranslation of foreign
operations (60.3) 107.3
Gain/ (loss) on hedging (net of deferred
tax) 2.0 (6.7)
-------- --------
Total other comprehensive (expense)/ income (60.2) 106.7
Total comprehensive (expense)/ income
attributable to owners of the Parent (87.9) 169.4
-------- --------
Basic earnings per ordinary share (pence
per share) 8 (7.1) 16.1
Diluted earnings per ordinary share (pence
per share) 8 (7.1) 16.0
--------------------------------------------- ------ -------- --------
Consolidated Statement of Financial Position
as at 30 September 2023
2023 2022
Note GBPm GBPm
Non-current assets
Goodwill 9 608.6 692.6
Intangible assets 10 359.4 385.4
Property, plant and equipment 27.5 31.3
Right-of-use assets 27.5 39.0
Non-current income tax receivable 1.4 1.0
Deferred tax assets 6 1.2 1.1
-------- --------
1,025.6 1,150.4
Current assets
Trade and other receivables 212.3 220.5
Income tax receivable 1.7 4.2
Cash and cash equivalents 12 76.2 101.2
-------- --------
290.2 325.9
-------- --------
Total assets 1,315.8 1,476.3
-------- --------
Current liabilities
Trade and other payables 149.8 165.6
Lease liabilities 9.9 11.8
Foreign exchange derivatives - 0.6
Income tax payable 15.3 22.7
Provisions 7.6 2.9
-------- --------
182.6 203.6
-------- --------
Non-current liabilities
Loans 11 52.6 29.3
Lease liabilities 23.6 34.9
Trade and other payables 2.3 3.5
Provisions 9.7 4.9
Deferred tax liabilities 6 57.7 58.4
-------- --------
145.9 131.0
-------- --------
Total liabilities 328.5 334.6
-------- --------
Total net assets 987.3 1,141.7
-------- --------
Capital and reserves attributable to owners
of the Parent
Share capital 3.8 3.9
Share premium 54.5 54.4
Share based payment reserve 5.3 6.0
Reverse acquisition reserve (8.5) (8.5)
Merger reserve 624.4 624.4
Foreign currency reserve 33.7 95.9
Hedge reserve (3.5) (5.5)
Retained earnings 277.6 371.1
-------- --------
Total equity 987.3 1,141.7
--------------------------------------------- ----- -------- --------
Consolidated Statement of Changes in Equity
for the year ended 30 September 2023
Other Total
Share reserves attributable
Share premium (see Retained to owners
capital account below) earnings of Parent
Note GBPm GBPm GBPm GBPm GBPm
At 30 September 2021 3.9 54.2 602.4 350.4 1,010.9
Profit for the year - - - 62.7 62.7
Loss on hedging - - (6.7) - (6.7)
Gain on retranslation of quasi
equity loans - - 6.1 - 6.1
Gain on retranslation of foreign
operations - - 107.3 - 107.3
--------- --------- ---------- ----------- ---------------
Total comprehensive income
for the year - - 106.7 62.7 169.4
Issue of shares - 0.2 - - 0.2
Deferred tax on unexercised
share options - - - (0.1) (0.1)
Dividends - - - (41.9) (41.9)
Equity-settled share based
payments charge - - 3.2 - 3.2
--------- --------- ---------- ----------- ---------------
At 30 September 2022 3.9 54.4 712.3 371.1 1,141.7
Loss for the year - - - (27.7) (27.7)
Gain on hedging - - 2.0 - 2.0
Loss on retranslation of quasi
equity loans - - (1.9) - (1.9)
Loss on retranslation of foreign
operations - - (60.3) - (60.3)
--------- --------- ---------- ----------- ---------------
Total comprehensive (expense)/
income for the year - - (60.2) (27.7) (87.9)
Issue of shares - 0.1 - - 0.1
Deferred tax on unexcercised
share options 6 - - - (0.2) (0.2)
Deferred consideration settlement - - (2.5) - (2.5)
Dividends 7 - - - (46.3) (46.3)
Purchase of own shares (0.1) - - (19.3) (19.4)
Equity-settled share based
payments charge - - 1.8 - 1.8
--------- --------- ---------- ----------- ---------------
At 30 September 2023 3.8 54.5 651.4 277.6 987.3
----------------------------------- ------- --------- --------- ---------- ----------- ---------------
Other reserves
Share Reverse Merger Foreign Total
based acquisition reserve currency Hedge other
payment reserve GBPm reserve reserve reserves
reserve GBPm GBPm GBPm GBPm
GBPm
At 30 September 2021 2.8 (8.5) 624.4 (17.5) 1.2 602.4
Other comprehensive (expense)/
income for the year - - - 113.4 (6.7) 106.7
Equity-settled share based
payments charge 3.2 - - - - 3.2
---------- -------------- ---------- ----------- ---------- -----------
At 30 September 2022 6.0 (8.5) 624.4 95.9 (5.5) 712.3
Other comprehensive (expense)/income
for the year - - - (62.2) 2.0 (60.2)
Equity-settled share based
payments charge 1.8 - - - - 1.8
Deferred Consideration settlement (2.5) - - - - (2.5)
---------- -------------- ---------- ----------- ---------- -----------
At 30 September 2023 5.3 (8.5) 624.4 33.7 (3.5) 651.4
-------------------------------------- ---------- -------------- ---------- ----------- ---------- -----------
Consolidated Statement of Cash Flows
for the year ended 30 September 2023
Note 2023 2022
GBPm GBPm
Cash flows from operating activities
(Loss)/ profit before tax (10.9) 83.2
Adjustments for:
Depreciation of property, plant and equipment 7.3 7.1
Amortisation of intangible assets 10 56.9 50.1
Impairment losses 9 62.4 -
Depreciation of right-of-use assets 9.4 10.8
Share-based payment expense 1.8 3.2
-------------------------------------------------- ------ ------- -------
Net finance costs 4.0 3.1
Operating cash flow before movements in working
capital 130.9 157.5
(Increase) in trade and other receivables (2.3) (5.6)
Increase/ (decrease) in trade and other payables
and provisions 0.6 (3.1)
-------------------------------------------------- ------ ------- -------
Cash generated from operations 129.2 148.8
Income tax paid (21.7) (21.3)
-------------------------------------------------- ------ ------- -------
Net cash inflow from operating activities 107.5 127.5
-------------------------------------------------- ------ ------- -------
Cash flows from investing activities
Interest received 0.6 0.1
Acquisition of subsidiary, net of cash acquired 13 (31.5) (14.1)
Purchases of property, plant and equipment (3.8) (5.3)
Purchases of intangibles (software) 10 (36.5) (24.3)
-------------------------------------------------- ------ ------- -------
Net cash outflows from investing activities (71.2) (43.6)
-------------------------------------------------- ------ ------- -------
Cash flows from financing activities
Proceeds from borrowings 49.0 -
Repayment of borrowings (25.0) (25.5)
Transaction costs relating to debt refinancing - (1.5)
Interest paid (2.6) (1.4)
Lease liability payments (including interest
charged of GBP1.1m (2022: GBP1.3m)) (11.9) (13.1)
Proceeds from the issue of share capital 0.1 0.2
Purchase of own shares (19.4) -
Dividends paid 7 (46.3) (41.9)
-------------------------------------------------- ------ ------- -------
Net cash outflow from financing activities (56.1) (83.2)
-------------------------------------------------- ------ ------- -------
Net (decrease)/ increase in cash and cash
equivalents (19.8) 0.7
-------------------------------------------------- ------ ------- -------
Cash and cash equivalents at beginning of
the year 101.2 92.5
Exchange (losses)/ gains on cash and cash
equivalents (5.2) 8.0
-------------------------------------------------- ------ ------- -------
Cash and cash equivalents at end of the year 12 76.2 101.2
-------------------------------------------------- ------ ------- -------
Notes to the Consolidated Financial Statements
1. Accounting policies
Basis of accounting and preparation of financial statements
The financial information is extracted from the Group's
consolidated financial statements for the year ended 30 September
2023, which were approved by the Board of Directors on 11 December
2023.
RWS Holdings plc ("the Parent Company") is a public company,
limited by shares, incorporated and domiciled in England and Wales
whose shares are publicly traded on AIM, the London Stock Exchange
regulated market.
The financial information set out in this announcement does not
constitute the Company's statutory accounts for the year ended 30
September 2023. Statutory accounts for 2022 have been delivered to
the registrar of companies, and those for 2023 will be delivered in
due course. The auditor has reported on those accounts; their
reports were (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
The principal accounting policies adopted in the preparation of
the consolidated financial statements are set out below and within
the Notes to which they relate to provide context to users of the
financial statements. The policies have been consistently applied
to both years presented, unless otherwise stated.
The potential climate change-related risks and opportunities to
which the Group is exposed, as identified by Management, are
disclosed in the the Group's Annual Report and Accounts .
Management has assessed the potential financial impacts relating to
the identified risks and exercised judgement in concluding that
there are no further material financial impacts of the Group's
climate-related risks and opportunities on the financial
statements. These judgements will be kept under review by
Management as the future impacts of climate change depend on
environmental, regulatory and other factors outside of the Group's
control which are not all currently known.
Going concern
In making their going concern assessment, the Directors have
considered the Group's current financial position and forecast
earnings and cashflows for the 18-month period ending 31 March
2025. The business plan used to support this going concern
assessment is derived from the Board-approved budget. The Directors
have undertaken a rigorous assessment of going concern and
liquidity taking into account key uncertainties and sensitivities
on the future performance of the Group. In making this assessment
the Directors have considered the Group's existing debt levels, the
committed funding and liquidity positions under its debt covenants
and its ability to continue generating cash from trading
activities.
As at 30 September 2023, the Group has net debt of GBP9.9m
comprising the Group's US$220m revolving credit facility ("RCF")
(GBP52.6m drawn at year end) and lease liabilities of GBP33.5m,
less cash and cash equivalents of GBP76.2m. The RCF matures in
August 2026 but is extendible for a further year subject to lender
consent. At year end the Group's net leverage ratio (as defined by
the RCF agreement) is -0.1x EBITDA, while its interest coverage
ratio (as defined by the RCF agreement) is 39.9x EBITDA and are
well within the covenants permitted by the Group's RCF
agreement.
In light of the Group's principal risks and uncertainties, the
Directors believe that the appropriate sensitivity in assessing the
Group and Company's ability to continue as a going concern are to
model a range of reasonably plausible downside scenarios, including
a 20% reduction to the Group's revenues and corresponding cash
flows, with mitigating actions from Management limited to
equivalent reductions in the Group's controllable cost base. No
significant structural changes to the Group have been assumed in
any of the downside scenarios modelled with all mitigating actions
wholly within Management's control.
In each of these modelled downside scenarios, the Group
continues to have significant covenant and liquidity headroom over
the period through to 31 March 2025. Consequently, the Directors
are confident that the Group and Company will have sufficient cash
reserves and committed debt facilities to withstand reasonably
plausible downside scenarios and therefore continue to meet its
liabilities as they fall due for the period ending 31 March 2025
and therefore prepared the financial statements on a going concern
basis.
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
recognised prospectively.
Judgements
In the process of applying the Group's accounting policies,
Management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
Revenue - multi-element arrangements
To determine the appropriate revenue recognition for contracts
containing multi-elements that include both products and services,
we evaluate whether the contract should be accounted for as a
single, or multiple performance obligations. Management is required
to exercise a degree of judgement in setting the criteria used for
determining when revenue which involves several elements should be
recognised and the stand-alone selling price of each element. The
Group generally determines the stand-alone selling prices of
elements based on prices which are not observable and are therefore
based on stand-alone list prices which are then subject to
discount. These prices are reviewed on an annual basis and amended
where appropriate. This is performed in conjunction with a fair
value assessment of the stand-alone selling prices to assess
reasonableness of the transaction price allocation. Further detail
regarding the stand-alone selling prices for the purpose of
allocating the transaction price in multi-element arrangements is
provided in Note 3.
The judgement could materially affect the timing and quantum of
revenue and profit recognised in each period. Licence revenue in
the year amounted to GBP61.1m (2022: GBP55.2m).
Capitalised development costs
The Group capitalises development costs relating to product
development and internally generated software in line with
International Accounting Standard ('IAS') 38 'Intangible Assets'.
Management applies judgement in determining if the costs meet the
criteria and are therefore eligible for capitalisation. Significant
judgements include the technical feasibility of the development,
recoverability of the costs incurred, economic viability of the
product, and potential market available considering its current and
future customers and when, in the development process, these
milestones have been met. Where software products are already in
use, Management applies judgement in determining whether further
development spend increases the economic benefit and whether any
previously capitalised costs should be expensed. Development costs
capitalised during the year amounted to GBP19.3m (2022: GBP22.6m)
(see Note 10).
Estimates and assumptions
The key assumptions and estimates concerning the future and
other key sources of estimation uncertainty at the reporting date,
that have significant risk of causing a material adjustment to the
carrying amount of the assets and liabilities within the next
financial year are discussed below:
Acquisition accounting
Judgement is often required in determining the identifiable
intangible assets acquired as part of a business combination that
must be recognised in the Group's consolidated financial
statements. Estimation is required in determining both the fair
value of all identified assets, liabilities acquired, any
contingent consideration and in particular intangible assets. In
determining these fair values, a range of assumptions are used,
including forecast revenue, discount rates, and attrition rates
that are specifically related to the intangible asset being valued.
The useful economic lives of these assets is being estimated using
Management's best estimates and reassessed annually.
Other estimates and assumptions
The consolidated financial statements include other estimates
and assumption. Whilst Management do not consider these to be
significant accounting estimates, the recognition and measurement
of certain material assets and liabilities are based on assumptions
which, if changed, could result in adjustments to the carrying
amounts of and liabilities.
Revenue - rendering of services
Management makes estimates of the total costs that will be
incurred on a contract by contract basis. Management reviews the
estimate of total costs on each contract on an ongoing basis to
ensure that the revenue recognised accurately reflects the
proportion of the work done at the balance sheet date. All
contracts are of a short-term nature. The majority of services work
is invoiced on completion and the amount of year end work in
progress was GBP52.7m (2022: GBP51.2m). The effect of changing the
estimated total cost of each contract could, in aggregate, have an
effect on the carrying amount of accrued income at the balance
sheet date.
Impairment of goodwill and intangible assets
An impairment test of goodwill (performed annually) and other
intangible assets (when an indicator of impairment exists),
requires estimation of the value in use of the cash generating
units ('CGUs') to which goodwill and other 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, for
which the Group considers revenue growth rates and EBITDA margin to
be significant estimates. The estimated future cash flows derived
are discounted to their present value using a pre-tax discount rate
that reflects estimates of market risk premium, asset betas, the
time value of money and the risks specific to the CGU. During the
period an impairment of GBP62.4m has been recognised in respect of
the Language and Content Technology CGU. See Note 9 and 10 for
further details.
Additionally, the Group has considered other reasonable possible
changes to the assumptions underlying the CGU valuations that would
need to occur and which would cause an impairment as follows:
Regulated Industries - EBITDA margin: By using the actual FY23
EBITDA margin (17.0%) across the projection period while keeping
all other factors consistent with the base model, we have noted an
impairment of GBP3.1m at the lower end range of the WACC which is a
reasonable possible change. Headroom would be eliminated at an
EBITDA margin of 17.2%. The value-in-use headroom of GBP65.3m
exceeded the carrying asset amount by 30%.
Language Services - Discount factor (WACC): There is evidence of
reasonable possible change at the higher end of the WACC
sensitivity (+200bps) which causes an impairment of GBP0.2m.
Headroom would be eliminated by an increase in the WACC of 199bps
or a reduction in revenue growth of 3.4%. The value-in-use headroom
of GBP60.9m exceeded the carrying asset amount by 15.2%.
Language and Content Technology - Revenue growth: adjusting
revenue by 1% impacts the value in use by approximately GBP17m
which is a reasonable possible change. The impairment would be
eliminated by increasing revenue by 3.4%.
IP Services - Due to the significant headroom available after
additional sensitivities have been performed no additional
disclosure is required. The value-in-use headroom of GBP216.7m
exceeded the carrying asset amount by 332%.
Taxation - uncertain tax positions
Uncertainties exist in respect of interpretation of complex tax
regulations, including transfer pricing, and the amount and timing
of future taxable income. Given the nature of the Group's operating
model, the wide range of international transactions and the
long-term nature and complexity of contractual agreements,
differences arising between the actual results and assumptions
made, or future changes to assumptions, could necessitate future
adjustments to taxation already recorded. The Group considers all
tax positions on a separate basis, with any amounts determined by
the most appropriate of either the expected value or most likely
amount on a case by case basis.
Most deferred tax assets are recognised because they can offset
the future taxable income from existing taxable differences
(primarily on acquired intangibles) relating to same jurisdiction
or entity. Where there are insufficient taxable differences,
deferred tax assets are recognised in respect of losses and other
deductible differences where current forecasts indicate profits
will arise in future periods against which they can be deducted.
The total value of uncertain tax positions ('UTPs') was GBP6.7m
(2022: GBP6.8m), see Note 6.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Accounting policy
IFRS 15 provides a single, principles based five step model to
be applied to all sales contracts as outlined below. It is based on
the transfer of control of goods and services to customers and
replaces the separate models for goods and services. The specific
application of the five step principles of IFRS 15 as they apply to
the Group's revenue contracts with customers are explained below at
an income stream level. In addition to this, the individual
performance obligations identified within the Group's contracts
with customers are individually described as part of this Note to
the financial statements.
For multi-element arrangements, revenue is allocated to each
performance obligation based on stand-alone selling price,
regardless of any separate prices stated within the contract. This
is most common within the Group's contract for technology licences,
which may include performance obligations in respect of the
licences, support and maintenance, hosting services and
professional services. The Group's software licences are either
perpetual, term or software as a service (SaaS) in nature. The
Group's revenue contracts do not include any material future vendor
commitments and thus no allowances for future costs are made.
The allocation of transaction price to these obligations is a
significant judgement, more details of the nature and impact of the
judgement are included in Note 2. The identification of the
performance obligations within some multi-element arrangements
involves judgement, however none of the Group's contracts requires
significant judgement in this regard.
Language Services and patent filing contracts are typically
billed in arrears on completion of the work with revenue recognised
as accrued income balances. The Group's technology contracts are
typically billed in advance and revenue recognition deferred where
the performance obligation is satisfied over time. The Group's
contracts for term licences are recognised upfront when performance
obligations are delivered in the same manner as a perpetual licence
sale but, typically, are billed annually and do not follow the same
billing pattern as the Group's contracts for perpetual licences,
instead billing follows more closely that of a SaaS licence
contract.
Disaggregated information about the Group's revenue recognition
policy and performance obligations are summarised below:
Patent Filing Services (IP Services segment)
The Group's Patent Filing revenue contracts with customers
include a sole performance obligation which is satisfied at a point
in time, being the completion of patent filing and delivery to the
client. Revenue is recognised when the sole performance obligation
is satisfied, which is when the benefits of control of the services
provided are delivered to the customer.
Language Services (IP Services, Language Services and Regulated
Industries segments)
The Group's Language Services contracts with customers provide
for the Group to be reimbursed for their performance under the
contract as the work is undertaken. Accordingly, as the Group has
both the right to payment and no alternative use for the translated
asset, the Group recognises revenue over time for this performance
obligation.
The Group measures the completeness of this performance
obligation using input methods. The relevant input method is the
cost incurred to date as a proportion of total costs, in
determining the progress towards the completion of the performance
obligation for Language Services contracts.
Perpetual and term licences (Language and Content Technology
segment)
The Group's perpetual and term licences are accounted for at a
point in time when the customer obtains control of the licence,
occurring either where the goods are shipped or, more commonly,
when electronic delivery has taken place and there is no
significant future vendor obligation.
The software to which the licence relates has significant
standalone functionality and the Group has determined that none of
the criteria that would indicate the licence is a right to access
apply. In addition, the Group has identified no other performance
obligations under their contracts for these licences which would
require the Group to undertake significant additional activities
which affects the software. The Group therefore believes the
obligation is right to use the licence as it presently exists and
therefore applies the point in time pattern of transfer.
Transaction price is allocated to licences using the residual
method based upon other components of the contract. The residual
method is used because the prices of licences are highly variable
and there is no discernible standalone selling price from past
transactions.
'SaaS' licences (Language and Content Technology segment)
Unlike the Group's perpetual and term licences, the Group has
identified that there are material ongoing performance obligations
associated with the provision of SaaS licences. The Group has
identified that this creates a right to access the intellectual
property, instead of a right to use. Accordingly, the associated
licence revenue is recognised over time, straight line for the
duration of the contract. As with other licences, the Group
utilises the residual method to allocate transaction price to these
performance obligations.
Support and maintenance (Language and Content Technology
segment)
Support and maintenance represents a stand ready obligation to
provide additional services to the Group's licence customers over
the period of support included in the contract. The Group measures
the obligation by reference to the standalone selling price, based
upon internal list prices subject to discount. The pattern of
transfer is deemed to be over time on the basis that this is a
continuing obligation over the period of support undertaken and
accordingly, recognised as revenue on a straight line basis over
the course of the contract.
Hosting services (Language and Content Technology segment)
The Group provides managed services (hosting) as part of certain
contracts with customers. The pattern of transfer for the service
is such that the customer simultaneously receives and consumes the
benefits provided by the Group and therefore, is recognised over
time for the duration of the agreement. Transaction price from the
contract is allocated to hosting services obligations based upon a
cost plus method.
Professional services (Language and Content Technology
segment)
The Group provides professional services to customers including
training, implementation and installation services alongside
certain contracts for software licences. These services are sold in
units of consultant time and are therefore measured on an output
method basis. Revenue is therefore recognised on these engagements
based on the units of time delivered to the end customer.
Transaction price is allocated based upon the standalone selling
price, calculated by reference to the internal list prices for
consultant time subject to any discounts. A small number of the
Group's professional services contracts are on a fixed price
contract and the output method is used based on an appraisal of
applicable milestones.
Revenue from contracts with customers
The Group generates all revenue from contracts with its
customers for the provision of translation and localisation,
intellectual property support solutions and the provision of
software. Revenue from providing these services during the year is
recognised both at a point in time and over time as shown in the
table below:
Timing of revenue recognition for contracts with 2023 2022
customers GBPm GBPm
At a point in time 22.4 21.2
Over time 82.4 86.0
IP Services 104.8 107.2
-------------------------------------------------- ------ ------
At a point in time 25.8 26.0
Over time 110.9 100.9
Language and Content Technology 136.7 126.9
-------------------------------------------------- ------ ------
Over time 329.8 342.1
Language Services 329.8 342.1
-------------------------------------------------- ------ ------
Over time 162.5 173.0
Regulated Industries 162.5 173.0
-------------------------------------------------- ------ ------
Total revenue from contracts with customers 733.8 749.2
-------------------------------------------------- ------ ------
See Note 4 for information on revenue disaggregation by
geographical location.
Capitalised contract costs
Capitalised contract costs primarily relate to sales commission
costs capitalised under IFRS 15 and are amortised over the length
of the contract. The group has taken advantage of the practical
expedient to recognise, as an expense, any costs which would be
recognised in fewer than 12 months from being incurred. This
primarily relates to the Group's language services commissions and
point in time technology revenue related commissions. The value of
capitalised contract costs at year end was GBP1.7m (2022: GBP1.9m).
Capitalised contract costs are recognised within other debtors on
the statement of financial position.
Receivables, contract assets and contract 2023 2022
liabilities with customers GBPm GBPm
Net trade receivables 138.6 148.9
Contract assets (accrued income) 52.7 51.2
Contract liabilities (deferred income) (49.9) (53.0)
Contract assets are recognised where performance obligations are
satisfied over time until the point at which the Group's right to
consideration is unconditional when these are classified as trade
receivables which, is generally the point of final invoicing.
For performance obligations satisfied over time, judgement is
required in determining whether a right to consideration is
unconditional. In such situations, a receivable is recognised for
the transaction price of the non-cancellable portion of the
contract when the Group starts satisfying the performance
obligation. The Group recognises revenue for partially satisfied
performance obligations as 'Accrued Income'.
The total value of the transaction price allocated to
unsatisfied or partially unsatisfied performance obligations at the
year-end is GBP53.5m (2022: GBP54.1m). Support and maintenance is a
stand ready obligation discharged straight line over the duration
of the Group's software contracts, the period over which this is
recognised can be identified based on the value of current and
non-current deferred income. Unsatisfied performance obligations in
respect of language and professional services are all short-term
and expected to be recognised in less than one year.
The Group offsets any contract liabilities with any contract
assets that may arise within the same customer contract, typically,
this only applies to the Group's licence and support and
maintenance revenue contracts. In all material respects there are
no significant changes in the Group's contract asset or liability
balances other than business-as-usual movements during the
year.
Revenue recognised in the year that was included in deferred
revenue at 1 October 2022 was GBP49.5m (2022: GBP40.8m).
4. Segment Information
The chief operating decision maker for the Group is identified
as the Group's Board of Directors collectively. The Board reviews
the Group's internal reporting in order to assess performance and
allocates resources. The Board divides the Group into four
reportable segments and assess the performance of each segment
based on the revenue and adjusted profit before tax.
The four reporting segments, which match the operating segments,
are explained in more detail below:
-- Language Services: The revenues are derived by providing
localisation services which include translation and adaptation of
content across a variety of media and materials to ensure brand
consistency.
-- Regulated Industries: Revenue is generated through the
translation and linguistic validation for customers who operate in
regulated industries such as life sciences.
-- IP Services: The Group's IP Services segment provides high
quality patent translations, filing services and a broad range of
intellectual property ("IP") search services.
-- Language and Content Technology ("L&CT"): Revenue is
generated through the provision of a range of translation
technologies and content platforms to clients. This was enhanced by
the acquisition of Propylon Holdings Ltd in July 2023.
Unallocated costs reflect corporate overheads and other expenses
not directly attributed to segments.
Segment results for the year
ended 30 September 2023 Regulated Language Unallocated
L&CT IP Services Industries Services Costs Group
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------- ------------ ------------ ---------- -------------- -------
Revenue from contracts with
customers 136.7 104.8 162.5 329.8 - 733.8
Operating profit/(loss) before
charging: 37.0 27.7 22.9 39.4 (3.2) 123.8
Amortisation of acquired intangibles (12.0) (0.1) (12.3) (14.4) - (38.8)
Impairment losses (see Note
9) (62.4) - - - - (62.4)
Acquisition costs - - - - (5.1) (5.1)
Exceptional items (see Note
5) (3.3) (6.0) (1.3) (5.7) (6.3) (22.6)
Share based payment expense (0.2) - (0.2) (0.5) (0.9) (1.8)
-------------------------------------- ------- ------------ ------------ ---------- -------------- -------
(Loss)/ profit from operations (40.9) 21.6 9.1 18.8 (15.5) (6.9)
Net finance expense (4.0)
-------
Loss before taxation (10.9)
Taxation (16.8)
-------
Loss for the year (27.7)
-------------------------------------- ------- ------------ ------------ ---------- -------------- -------
Segment results for the year
ended 30 September 2022 Regulated Language Unallocated
L&CT IP Services Industries Services Costs Group
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------ ------------ ------------ ---------- -------------- -------
Revenue from contracts with
customers 126.9 107.2 173.0 342.1 - 749.2
Operating profit/(loss) before
charging: 37.6 30.1 31.6 53.3 (14.1) 138.5
Amortisation of acquired intangibles (8.0) (0.2) (12.4) (13.8) - (34.4)
Acquisition costs - - - - (2.1) (2.1)
Exceptional items (see Note
5) (3.0) (0.5) (2.3) (3.9) (2.8) (12.5)
Share based payment expense (1.8) (0.2) (0.3) (0.4) (0.5) (3.2)
Profit from operations 24.8 29.2 16.6 35.2 (19.5) 86.3
-------------------------------------- ------ ------------ ------------ ---------- -------------- -------
Net finance expense (3.1)
Profit before taxation 83.2
-------
Taxation (20.5)
-------
Profit for the year 62.7
-------------------------------------- ------ ------------ ------------ ---------- -------------- -------
The table below shows revenue by the geographic market in which
clients are located.
Revenue by client location 2023 2022
GBPm GBPm
UK 81.7 85.9
Continental Europe 167.8 178.2
United States of America 393.2 390.2
Rest of the World 91.1 94.9
------ ------
Total 733.8 749.2
---------------------------- ------ ------
The Group does not place reliance on any specific customer and
has no individual customers that generate more than 10% or more of
its total Group revenue.
The following is an analysis of revenue by the geographical area
in which the Group's undertakings are located.
Revenue by subsidiary location
2023 2022
GBPm GBPm
UK 191.8 189.5
Continental Europe 156.6 166.6
United States of America 334.6 339.0
Rest of the World 50.8 54.1
------- -------
Total 733.8 749.2
-------------------------------- ------- -------
The table below shows operating assets by geographical location
of the Group's undertakings. These assets exclude goodwill and
acquired intangibles.
Operating assets by geography 2023 2022
GBPm GBPm
UK 190.2 162.7
Continental Europe 80.8 79.0
United States of America 128.1 147.2
Rest of the World 59.1 67.5
------- -------
Total 458.2 456.4
------------------------------- ------- -------
5. exceptional items
Accounting policy
Exceptional items are those items that in Management's judgement
should be disclosed separately by virtue of their size, nature or
incidence, in order to provide a better understanding of the
underlying financial performance of the Group. In determining
whether an event or transaction is exceptional, Management
considers qualitative factors such as frequency or predictability
of occurrence. Examples of exceptional items include the costs of
integration, severance and restructuring costs which Management do
not believe reflect the business's trading performance and
therefore are adjusted to present consistency between periods.
2022
2023 2023 2023 2022 Tax 2022
Pre-tax Tax impact Total Pre-tax impact Total
GBPm GBPm GBPm GBPm GBPm GBPm
Group transformation
programme (5.5) 1.1 (4.4) (0.3) 0.1 (0.2)
Restructuring & integration
related costs (12.3) 2.9 (9.4) (12.2) 2.4 (9.8)
Legacy payment arrangements (4.8) - (4.8) - - -
----------------------------- ---------- ------------ ------- --------- -------- -------
Total exceptional items
- operating (22.6) 4.0 (18.6) (12.5) 2.5 (10.0)
Amortisation of exceptional
finance (0.3) - (0.3) (0.3) - (0.3)
----------------------------- ---------- ------------ ------- --------- -------- -------
Total exceptional items
- financing (0.3) - (0.3) (0.3) - (0.3)
----------------------------- ---------- ------------ ------- --------- -------- -------
Total exceptional items (22.9) 4.0 (18.9) (12.8) 2.5 (10.3)
----------------------------- ---------- ------------ ------- --------- -------- -------
A description of the principal items included is provided
below:
Transformation costs - GBP5.5m was incurred during the period in
respect of transformation programmes for Finance and Human
Resources initiated as part of a strategic review of the business
to drive improved efficiencies in future periods and includes
severance costs of GBP1.7m. In total GBP2.4m has been paid in the
period. The severance costs are expected to be paid during the
first half of FY24 and the ongoing benefits from the integration
will be recognised in the operating profit in the Statement of
Comprehensive Income.
Restructuring Costs - GBP7.6m was incurred in respect of
severance and termination payments related to the Group's cost
reduction plan which is expected to have a positive impact in FY24
of approximately GBP25m. A further GBP0.6m of severance costs were
incurred in respect of the businesses defined integration plan for
the OneRWS initiative. A total of GBP4.4m of these costs were paid
during the period.
Integration costs - GBP3.4m was incurred in respect of IT
integration projects to enhance service delivery capability and
reduce business complexity across the Group. A further GBP0.7m was
incurred related to delivering synergies from business integration
and ongoing simplification of the Group's corporate structure. All
of these amounts were paid during the period.
Legacy payments - GBP4.3m was recognised in the period in
respect of an ongoing liability related to historic agreements with
former owners of the business and their respective families. This
expense had previously been recognised as incurred. A further
GBP0.5m was paid during the period in respect of current year
obligations.
Finance costs - GBP0.3m was incurred related to amortisation
expense associated with a gain on debt modification recognised in
previous accounting periods.
In the prior period, exceptional costs included GBP7.4m of IT
integration costs, GBP3.2m of severance costs, GBP1.6m of contract
termination costs, GBP0.3m for Group Transformation programmes and
GBP0.3m of exceptional finance costs. In total GBP12.5m was charged
during the prior period.
Acquisition-related costs
Acquisition-related costs of GBP5.1m (2022: GBP2.1m) includes a
total of GBP3.3m of contingent consideration associated with the
acquisition of Propylon Holdings Limited (GBP1.2m) during the
period and the acquisition of Liones Holdings B.V. Limited
(GBP2.1m) in the prior period. These amounts are being recognised
in accordance with IFRS 3.
A further GBP1.5m of transaction fees were incurred associated
with the Propylon acquisition, and GBP0.3m in respect of on-going
strategic projects. These have been accounted for as exceptional
items in line with the Group's accounting policy and treatment of
similar costs during the year ended 30 September 2022.
6. TAXATION
Accounting policy
The charge for current taxation is based on the results for the
year as adjusted for items which are non-assessable or disallowed.
It is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date. Current tax assets
and liabilities are offset when the relevant tax authority permits
net settlement and the group intends to settle on a net basis.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation
purposes where this differs.
Deferred tax is not recognised for temporary differences related
to investments in subsidiaries and associates where the Group is
able to control the timing of the reversal of the temporary
difference and it is probable that this will not reverse in the
foreseeable future; on the initial recognition of non-deductible
goodwill; and on the initial recognition of an asset or liability
in a transaction that is not a business combination and that, at
the time of the transaction, does not affect the accounting or
taxable profit.
Deferred tax is measured on an undiscounted basis, and at the
tax rates that have been enacted or substantively enacted by the
reporting date that are expected to apply in the periods in which
the asset or liability is settled.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profits will be available against
which they can be used and are reviewed at each reporting date.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority, when the
Group intends to settle its current tax assets and liabilities on a
net basis and that authority permits the Group to make a single net
payment.
Current and deferred tax is recognised in the income statement
except when it relates to items credited or charged directly to
other comprehensive income or equity, in which case the current or
deferred tax is also recognised within other comprehensive income
or equity respectively (for example share-based payments).
Uncertain tax positions
The Group operates in numerous tax jurisdictions around the
world. At any given time, the Group is involved in disputes and tax
audits and will also have a number of tax returns potentially
subject to audit. These tax audits may give rise to significant tax
issues take several years to resolve. In estimating the probability
and amount of any tax charge, Management takes into account the
views of internal and external advisers and updates the amount of
tax provision whenever necessary. The ultimate tax liability may
differ from the amount provided depending on interpretations of tax
law, settlement negotiations or changes in legislation. As
referenced in Note 2, the Group considers all tax positions
separately and uses either the most likely or expected value method
of calculation on a case by case basis.
VAT
Revenues, expenses and assets are recognised net of the amount
of VAT except where the VAT incurred on a purchase of goods and
services is not recoverable from the taxation authority, in which
case the VAT is recognised as part of the cost of acquisition of
the asset or as part of the expense item as applicable; and trade
receivables and payables are stated with the amount of VAT
included. The net amount of VAT recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the balance sheet.
Taxation recognised in income and equity is as 2023 2022
follows: GBPm GBPm
Current Tax Charge
UK corporation tax at 22% (2022: 19%) 4.8 5.7
Overseas current tax charge 17.7 18.7
Adjustment in respect of previous years (2.4) (4.2)
Deferred Tax Charge
Origination and reversal of temporary differences (5.9) (2.4)
Rate change impact 0.2 0.1
Adjustment in respect of previous years 2.4 2.6
--------------------------------------------------- ------ ------
Total tax expense in profit or loss 16.8 20.5
Total tax charge in equity 0.2 0.1
Total tax in other comprehensive income (0.3) 0.7
--------------------------------------------------- ------ ------
Total tax charge for the year 16.7 21.3
--------------------------------------------------- ------ ------
Reconciliation of the Group's tax charge to the 2023 2022
UK statutory rate: GBPm GBPm
(Loss)/ profit before taxation (10.9) 83.2
Notional tax charge at UK corporation tax rate
of 22% (2022: 19%) (2.4) 15.8
Effects of:
Expenses not deductible for tax purposes 3.1 2.2
Impact of impairment losses 13.7 -
Adjustments in respect of previous years - (1.6)
Changes in tax rates 0.2 0.1
Higher tax rates on overseas earnings 2.2 4.0
------------------------------------------------- --------- ------
Tax charge as per the income statement 16.8 20.5
------------------------------------------------- --------- ------
Effective tax rate (154.1)% 24.6%
------------------------------------------------- --------- ------
Factors that may affect future tax charges
The Group's taxation strategy is aligned to its business
strategy and operational needs. The Directors are responsible for
tax strategy supported by a global team of tax professionals and
advisers. RWS strives for an open and transparent relationship with
all tax authorities and are vigilant in ensuring that the Group
complies with current tax legislation.
The Group's effective tax rate for the year is higher than the
UK's statutory tax rate due to the impact of non-tax deductibility
of acquisition costs, as well as non recoverable withholding tax
suffered of intragroup dividends. The Group's tax rate is also
sensitive to the geographic mix of profits and reflects a
combination of higher rates in certain jurisdictions, such as
Germany and Japan, a lower rate in the UK and Czechia with other
rates that lie in between.
The adjustments in respect of prior periods includes a release
of a release of historic uncertain tax positions, offset by new
risks identified and provided for during the period. There has also
been a recharacterisation of current and deferred tax assets and
liabilities following true ups of filed tax returns.
Transfer pricing
Tax liabilities are recognised when it is considered probable
that there will be a future outflow of funds to a tax authority.
The methodology used to estimate liabilities is set out in Note 2.
In common with other multinational companies and given the Group
has operations in 33 countries, transfer pricing arrangements are
in place covering transactions that occur between Group
entities.
The Group periodically reviews its historic UTPs for transfer
pricing and whilst it is not possible to predict the outcome of any
pending tax authority investigations, adequate provisions are
considered to be included in the Group accounts to cover any
expected estimated future settlement. In carrying out this review,
and subsequent quantification, Management has made judgements,
taking into account: the status of any unresolved matters; strength
of technical argument and clarity of legislation; external advice,
statute of limitations and any expected recoverable amounts under
the Mutual Agreement Procedure ('MAP'). During the period the Group
reduced the provision for liabilities that are expected to no
longer be sought by tax authorities on the basis that the relevant
statute of limitations has expired. In addition, UTPs related to
transfer pricing were increased during the year to reflect current
period trading as well as new historic risks identified during the
period.
The current tax liability of GBP15.3m on the balance sheet
comprises GBP9.7m of UTPs, although it is not expected that these
will be cash settled within 12 months of the year end date. The
deferred tax liability of GBP57.7m on the balance sheet is net of
GBP3.0m of deferred tax assets relating to uncertain tax
positions.
Pillar Two
On 20 December 2021, the OECD published their proposals in
relation to Global Anti-Base Erosion Rules, which provide for an
internationally co-ordinated system of taxation to ensure that
large multinational groups pay a minimum level of corporate income
tax in countries where they operate. The UK enacted its Pillar Two
legislation in July 2023 which will require UK multinational
entities to comply with the Pillar Two rules for periods starting
after 31 December 2023 which for RWS will be the period ended 30
September 2025. As the Pillar Two rules are not yet in force, RWS
has not sought to quantify the known or reasonably estimated impact
of the Pillar Two rules in this set of financial statements.
Share Accelerated Other
based capital temporary Acquired
payments allowances differences intangibles Tax losses Total
Deferred tax GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ---------- -------------- ------------- ------------- ----------- --------
At 30 September 2021 0.6 (1.7) 6.8 (71.6) 16.2 (49.7)
Adjustments in respect
of prior years - (0.1) 1.7 - (4.2) (2.6)
Acquisitions - - - (2.5) - (2.5)
Credited to income - - 0.4 4.4 (2.5) 2.3
Charged to equity
/ OCI (0.1) - - - - (0.1)
Foreign exchange differences - - 0.9 (6.0) 0.4 (4.7)
------------------------------ ---------- -------------- ------------- ------------- ----------- --------
At 30 September 2022 0.5 (1.8) 9.8 (75.7) 9.9 (57.3)
------------------------------ ---------- -------------- ------------- ------------- ----------- --------
Adjustments in respect
of prior years - (0.1) (0.1) 0.1 (2.3) (2.4)
Acquisitions - - - (1.3) - (1.3)
Credited to income 0.2 - 1.7 4.4 (0.6) 5.7
Transfers to current
taxes - - - - (2.8) (2.8)
Charged to equity
/ OCI (0.2) - - - - (0.2)
Foreign exchange differences - - (1.4) 3.4 (0.2) 1.8
------------------------------ ---------- -------------- ------------- ------------- ----------- --------
At 30 September 2023 0.5 (1.9) 10.0 (69.1) 4.0 (56.5)
------------------------------ ---------- -------------- ------------- ------------- ----------- --------
Deferred tax assets and liabilities are presented on the balance
sheet after jurisdictional netting as follows:
2023 2022
GBPm GBPm
Deferred tax assets 1.2 1.1
Deferred tax liabilities (57.7) (58.4)
---------------------------- ------- -------
Net deferred tax liability (56.5) (57.3)
---------------------------- ------- -------
Deferred tax assets and liabilities
Deferred tax is calculated using tax rates that are expected to
apply in the period when the liability has been settled or the
asset realised based on tax rates that have been enacted or
substantively enacted at the reporting date.
Most deferred tax assets are recognised because they can offset
the future taxable income from existing taxable differences
(primarily on acquired intangibles) relating to same jurisdiction
or entity. Where there are insufficient taxable differences,
deferred tax assets are recognised in respect of losses and other
deductible differences where current forecasts indicate profits
will arise in future periods against which they can be
deducted.
Losses
At the balance sheet date the Group has unused tax losses of
GBP113.0m (2022: GBP143.9m) available for offset against future
profits. A deferred tax asset of GBP3.9m (2022: GBP9.9m) has been
recognised in respect of GBP17.7m (2022: GBP44.0m) of such losses.
These losses include corresponding adjustments that could be
claimed on settlement of uncertain tax positions with overseas tax
authorities as accounted for under International Financial
Reporting Interpretations Committee 23 ('IFRIC 23').
No deferred tax asset has been recognised in respect of the
remaining GBP95.3m (2022: GBP99.9m) as these can only be used to
offset limited types of profits and as it is not considered
probable that there will be the required type of future trading or
non-trading profits available in the correct entities necessary to
permit offset and recognition.
The unrecognised deferred tax asset on losses is GBP21.9m (2022:
GBP23.5m).
Recognised deferred tax assets principally relate to UK and US
activities of the acquired SDL business.
The Group has recognised deferred tax assets on losses in the US
which have a 20 year expiry date and expects to use these losses in
this period, the earliest date these losses expire is 31 December
2033 and at the year-end losses amounted to GBP4.2m (2022:
GBP6.0m).
Unremitted earnings
Dividends received from subsidiaries are largely exempt from UK
tax but may be subject to dividend withholding taxes levied by the
overseas tax jurisdictions in which the subsidiaries operate. The
gross temporary differences of those subsidiaries affected by such
potential taxes is GBP79.2m. The Group has an estimated
unrecognised deferred tax liability of GBP4.9m of unremitted
earnings where no distributions are expected to be paid in the
foreseeable future.
7. DIVIDS TO SHAREHOLDERS
Accounting policy
Dividends payable to the Parent Company's shareholders are
recognised as a liability in the Group's financial statements in
the period in which dividends are approved by the Parent Company's
shareholders.
2023 2022
GBPm GBPm
Final ordinary dividend for the year ended 30
September 2022 was 9.5p (2021: 8.5p) 37.0 33.1
Interim ordinary dividend, paid 21 July 2023
was 2.4p (2022: 2.0p paid 22 July 2022) 9.3 8.8
----------------------------------------------- ------- -------
46.3 41.9
----------------------------------------------- ------- -------
The Directors recommend a final dividend in respect of the
financial year ended 30 September 2023 of 9.8pence per ordinary
share, to be paid on 23 February 2024 to shareholders who are on
the register at 26 January 2024. This dividend is not reflected in
these financial statements as it does not represent a liability at
30 September 2023. The final proposed dividend will reduce
shareholders' funds by an estimated GBP36.8m.
8. EARNINGS PER SHARE
Accounting policy
Basic earnings per share
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.
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the basic
earnings per share for the effects of share options and awards
granted to employees. These are included in the calculation when
their effects are dilutive.
Adjusted earnings per share
Adjusted earnings per share is a trend measure, which presents
the long-term profitability of the Group, excluding the impact of
specific transactions that Management considers affects the Group's
short-term profitability. The Group presents this measure to assist
investors in their understanding of trends. Adjusted earnings is
the numerator used for this measure. Adjusted earnings and adjusted
earnings per share are therefore stated before amortisation of
acquired intangibles, acquisition costs, share based payment
expenses and exceptional items, net of any associated tax
effects.
The reconciliation between the basic and adjusted earnings per
share is as follows:
2022
2023 2022 2023 Diluted
Basic Basic Diluted earnings
earnings earnings earnings per
2023 2022 per share per share per share share
GBPm GBPm pence pence pence pence
------------------------------- ------- ------- ------------ ----------- ----------- ----------
(Loss)/ profit for the
year (27.7) 62.7 (7.1) 16.1 (7.1) 16.0
------------------------------- ------- ------- ------------ ----------- ----------- ----------
Adjustments:
Amortisation of acquired
intangibles 38.8 34.4
Impairment losses 62.4 -
Acquisition costs 5.1 2.1
Share based payments
expense 1.8 3.2
Net gain of debt modification 0.3 0.3
Exceptional items 22.6 12.5
Tax effect of adjustments (12.8) (10.0)
Tax adjustments in respect
of prior years - (1.6)
------------------------------- ------- ------- ------------ ----------- ----------- ----------
Adjusted earnings 90.5 103.6 23.3 26.6 23.3 26.5
------------------------------- ------- ------- ------------ ----------- ----------- ----------
2023 2022
Number Number
Weighted average number of ordinary shares
in issue for basic earnings 388,231,290 389,374,854
Dilutive impact of share options 30,688 1,469,514
-------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
for diluted earnings 388,261,978 390,844,368
-------------------------------------------- ------------ ------------
9. GOODWILL
Cost and net book value 2023 2022
GBPm GBPm
-------------------------------------------------- ------- ------
At 1 October 692.6 615.8
Additions (Note 13) 12.9 7.8
Impairment (62.4) -
Adjustments in respect of prior periods (Note 6) - (0.4)
Exchange adjustments (34.5) 69.4
-------------------------------------------------- ------- ------
At 30 September 608.6 692.6
-------------------------------------------------- ------- ------
Accounting policy
Goodwill arising on business combinations (representing the
excess of fair value of the consideration given over the fair value
of the separable net assets acquired) is capitalised, and its
subsequent measurement is based on annual impairment reviews, with
any impairment losses recognised immediately in profit or loss in
the statement of comprehensive income. Direct costs of acquisition
are recognised immediately in profit or loss in the statement of
comprehensive income as an expense.
At least annually, or when otherwise required, the Directors
review the carrying amounts of the Group's property, plant and
equipment and intangible assets to determine whether there is any
indication of an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of any impairment loss. A full impairment
review is performed annually for goodwill regardless of whether an
indicator of impairment exists.
The recoverable amount is the higher of fair value less costs of
disposal and value in use. In assessing value in use, 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 as well as risks specific to the asset or
CGU for which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset or CGU is estimated to be
less than its carrying amount, the carrying amount of the asset or
CGU is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately in profit or loss in the
consolidated statement of comprehensive income.
Where an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but not beyond the carrying amount that would
have been determined had no impairment loss been recognised for the
asset in prior-years. A reversal of an impairment loss is
recognised immediately as income in the Consolidated Statement of
Comprehensive Income, although impairment losses relating to
goodwill may not be reversed.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows; its CGU. Goodwill is allocated
on initial recognition to each of the Group's CGUs that are
expected to benefit from the synergies of the combination giving
rise to the goodwill. Goodwill is allocated at the lowest level
monitored by Management, and no higher than an operating
segment.
Key assumptions for the value
in use - 30 September 2023 Average Average
Long-term Discount revenue EBITDA
growth rate rate growth margin
IP Services 2.0% 14.3% 4.0% 29.7%
Regulated Industries 2.0% 15.2% 2.7% 21.9%
Language Services 2.0% 15.1% 2.9% 17.2%
Language and Content Technology 2.0% 17.4% 8.7% 36.3%
--------------------------------- ------------- --------- ---------- ----------
Key assumptions for the value in use
- 30 September 2022
IP Services 2.0% 12.5% 3.2% 30.7%
Regulated Industries 2.0% 13.2% 6.7% 25.1%
Language Services 2.0% 12.7% 5.1% 20.4%
Language and Content Technology 2.0% 13.5% 10.9% 41.1%
-------------------------------------- ----- ------ ------ ------
The Group has four CGUs and in accordance with IAS 36,
Management performed a value in use impairment test at 30 September
2023. The key assumptions for the value-in-use calculations are
those regarding discount rates and revenue 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.
Determination of key assumption s
The long-term growth rate is the rate applied to determine the
terminal value on year five cash flows. This rate is determined by
the long term compound annual growth rate in adjusted operating
profit as estimated by Management with reference to external
benchmarks.
The discount rate is the pre-tax discount rate calculated by
Management based on a series of inputs starting with a risk free
rate based on the return on long term, zero coupon government
bonds. The risk free rate is adjusted with a beta to reflect
sensitivities to market changes, before consideration of other
factors such as a size premium.
Revenue growth is the average annual increase in revenue over
the five-year projection period. The revenue growth rate is
determined by Management based on the most recently prepared budget
for the future period and adjusted for longer term developments
within operating segments where such developments are known and
possible to reliably forecast.
The trading projections for the five-year period underlying the
value-in-use reflect assumptions for EBITDA margins. The EBITDA
margin is based on a number of elements of the operating model over
the longer-term, including pricing trends, volume growth and the
mix of complexity of translation activity and assumptions regarding
cost inflation.
As part of the value-in-use calculation, Management prepares
cash flow forecasts derived from the most recent financial budgets
as approved by the Board of Directors and extrapolates the cash
flows for future years based on estimated growth rates which are
based on Management's best estimate of the expected growth rate of
the market in which the CGU operates.
The Group has conducted sensitivity analyses on the value in
use/recoverable amount of each of the CGUs. Based on the result of
the value in use calculations undertaken, the Directors conclude
that the allocation of goodwill to each of the CGUs is as shown in
the table below:
The allocation of goodwill to each CGU is as follows 2023 2022
: GBPm GBPm
IP Services 33.2 35.8
Regulated Industries 141.8 150.4
Language Services 223.9 239.9
Language and Content Technology 209.7 266.5
------------------------------------------------------ ------ ------
At 30 September 608.6 692.6
------------------------------------------------------ ------ ------
Goodwill assessment
The value-in-use calculations performed confirm that the
recoverable goodwill amount for IP Services, Regulated Industries
and Language Services CGUs each exceed their asset carrying value.
The calculation for the Language and Content Technology CGU gave a
value-in-use result of GBP333.3m which was GBP62.4m below the asset
carrying value and accordingly an equivalent impairment loss has
been recognised.
This impairment loss has been recognised within administrative
expenses in the Consolidated Statement of Comprehensive Income in
the period. The impairment has arisen primarily due to the
significant increase in discount rates as a result of macroeconomic
factors and to a lesser extent, uncertainty regarding longer term
growth rates. Whilst the Group expects long-term growth from the
Technology strategy, the accounting standard (IAS 36) for
impairment assessments does not allow forecasts to be used where
assumptions cannot be evidenced or have not yet been fully
implemented (e.g. cost savings). As a result, whilst the Group is
focused on committing to delivering its growth strategy, the
ongoing cost reduction and efficiency programmes restrict the
available evidence to demonstrate this growth as at the balance
sheet date. Consequently, the full extent of potential longer-term
gains are not reflected in the impairment modelling.
10. INTANGIBLE ASSETS
Accounting policy
Intangible assets are carried at cost less accumulated
amortisation and impairment losses. Intangible assets acquired from
a business combination are initially recognised at fair value. An
intangible asset acquired as part of a business combination is
recognised outside goodwill if the asset is separable or arises
from contractual or other legal rights.
Where computer software is not an integral part of a related
item of computer hardware, the software is classified as an
intangible asset. The capitalised costs of software for internal
use include external direct costs of materials and services
consumed in developing or obtaining the software, and directly
attributable payroll and payroll-related costs arising from the
assignment of employees to implementation projects. Capitalisation
of these costs ceases when the software is substantially complete
and ready for its intended internal use.
Other intangible assets are amortised using the straight-line
method over their estimated useful lives as follows:
Trade names 5 to 8 years
--------------------- --------------
Clinician database 10 years
--------------------- --------------
Supplier database 13 years
--------------------- --------------
Technology 3 to 7 years
--------------------- --------------
Non-compete clauses 5 years
--------------------- --------------
Trademarks 5 years
--------------------- --------------
Client relationships 7 to 20 years
--------------------- --------------
Acquired computer software licences are capitalised on the basis
of the costs incurred to acquire and bring to use the specific
software. These assets are amortised using the straight-line method
over their estimated useful lives which range from one to five
years, these costs are recognised in administrative expenses within
the consolidated statement of comprehensive income.
Research and development
Research costs are expensed as incurred. Development expenditure
is capitalised when Management is satisfied that the expenditure
being incurred meets the recognition criteria from IAS 38.
Specifically, this is at the point which Management believe they
can demonstrate:
The technical feasibility of completing the asset
The intention to complete the asset for use or sale
The ability to use or sell the asset
The future benefits expected to be realised from the sale or use
of the asset
The availability of sufficient resources to enable completion of
the asset
Reliable measurement for the costs incurred during the course of
development
Where these criteria are not met the expenditure is expensed to
the income statement. Following the initial capitalisation of the
development expenditure the cost model is applied, requiring the
asset to be carried at cost less any accumulated amortisation and
impairment losses. Any expenditure capitalised is amortised over
the period of expected future economic benefit from the related
project. For capitalised development costs this period is 3 to 7
years.
The carrying value of development costs is reviewed for
impairment annually when the asset is not yet in use or more
frequently when an indicator of impairment arises during the
reporting period indicating that the carrying value may not be
recoverable.
Development costs that are subject to amortisation are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.
Client
Clinician relationships Internally
Trade & supplier Non-compete & order generated
names databases Technology & trademarks books Software software Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------- ------------ ----------- -------------- --------------- ----------- ----------- -------
Cost
At 30
September
2021 - 6.4 123.4 2.1 313.0 12.7 15.5 473.1
Additions - - 15.5 - 0.2 1.9 6.9 24.5
Acquisitions 0.4 - 2.1 - 6.4 - - 8.9
Adjustments
in
respect of
prior
periods - - - - 0.4 - - 0.4
Disposals - - - - - (1.9) (2.7) (4.6)
Currency
translation - 1.2 1.2 0.4 47.5 0.8 0.6 51.7
-------------- ------- ------------ ----------- -------------- --------------- ----------- ----------- -------
At 30
September
2022 0.4 7.6 142.2 2.5 367.5 13.5 20.3 554.0
Additions - - 15.4 - - 2.5 18.6 36.5
Transfers - - (1.0) - - - 1.0 -
Acquisitions
(Note 13) 0.7 - 3.1 - 8.0 - - 11.8
Disposals - - - - - (0.6) (3.7) (4.3)
Currency
translation - (0.6) (1.2) (0.2) (23.9) (0.2) (0.1) (26.2)
-------------- ------- ------------ ----------- -------------- --------------- ----------- ----------- -------
At 30
September
2023 1.1 7.0 158.5 2.3 351.6 15.2 36.1 571.8
-------------- ------- ------------ ----------- -------------- --------------- ----------- ----------- -------
Accumulated amortisation and
impairment
------------------------------------- ----------- -------------- --------------- ----------- ----------- -------
At 30
September
2021 - 3.2 20.0 1.9 68.2 8.8 4.4 106.5
Amortisation
charge - 0.7 18.4 0.2 25.5 1.9 3.4 50.1
Disposals - - - - - (1.9) (2.7) (4.6)
Currency
translation - 0.7 1.1 0.4 13.6 0.5 0.3 16.6
-------------- ------- ------------ ----------- -------------- --------------- ----------- ----------- -------
At 30
September
2022 - 4.6 39.5 2.5 107.3 9.3 5.4 168.6
-------------- ------- ------------ ----------- -------------- --------------- ----------- ----------- -------
Amortisation
charge 0.1 0.7 23.8 - 26.4 2.0 3.9 56.9
Disposals - - - - - (0.6) (3.7) (4.3)
Currency
translation - (0.4) (0.5) (0.2) (7.5) (0.1) (0.1) (8.8)
-------------- ------- ------------ ----------- -------------- --------------- ----------- ----------- -------
At 30
September
2023 0.1 4.9 62.8 2.3 126.2 10.6 5.5 212.4
-------------- ------- ------------ ----------- -------------- --------------- ----------- ----------- -------
Net book
value
At 30
September
2021 - 3.2 103.4 0.2 244.8 3.9 11.1 366.6
-------------- ------- ------------ ----------- -------------- --------------- ----------- ----------- -------
At 30
September
2022 0.4 3.0 102.7 - 260.2 4.2 14.9 385.4
-------------- ------- ------------ ----------- -------------- --------------- ----------- ----------- -------
At 30
September
2023 1.0 2.1 95.7 - 225.4 4.6 30.6 359.4
-------------- ------- ------------ ----------- -------------- --------------- ----------- ----------- -------
Amortisation of acquired intangibles was GBP38.8m (2022:
GBP34.4m) and amortisation of other intangibles was GBP18.1m (2022:
GBP15.7m). The GBP18.1m amortisation of other intangibles comprises
GBP2.0m on amortisation of software (2022: GBP1.9m), GBP3.9m on
internally developed intangibles (2022: GBP3.4m).and GBP12.2m
(2022: GBP10.4m) of technology which related to the SDL business.
The residual GBP38.8m of amortisation was wholly incurred on
acquired intangible assets (2022: GBP34.4m). The Group has
identified intangible assets which are individually material as
follows:
SDL technology products acquired of GBP49.8m (2022: GBP61.9m)
with a remaining useful life of 4 years
SDL's Helix platform of GBP12.6m (2022: GBP15.8m) with a
remaining useful life of 4 years
SDL's customer relationships of GBP104.3m (2022: GBP122.9m) with
a remaining useful life of 8 years
Moravia's customer relationships of GBP85.4m (2022: GBP99.9m)
with a remaining useful life of 14 years and
Life Science's customer relationships of GBP8.2m (2022:
GBP11.6m) with a remaining useful life of 4 years.
No other classes of intangible asset hold individually material
items. The remaining average useful life is 10 years.
11. LOANS
Accounting policy
Loans are recognised initially at fair value, less directly
attributable transaction costs. Subsequent to initial recognition,
loans are stated at amortised cost using the effective interest
method. Loans are classified as current, unless the Group has the
discretion to roll over an obligation for a period of at least 12
months under an existing loan facility.
Directly attributable transaction costs are capitalised into the
loans to which they relate and are amortised using the effective
interest rate method.
When an existing loan facility is replaced by another from the
same lender on substantially different terms, or the terms of an
existing loan are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the profit or loss
in the statement of comprehensive income.
2023 2022
GBPm GBPm
Due in more than one year
Loan 54.7 32.2
Issue costs (2.1) (2.9)
--------------------------- ------- ------
At 30 September 52.6 29.3
--------------------------- ------- ------
At 1 Non-cash
Analysis of net debt 30 October Acquired Cash flows charges At 30 September
September 2023 GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- --------- ----------- ----------- ----------------
Cash and cash equivalents 101.2 3.3 (23.1) (5.2) 76.2
Issue costs 2.9 - - (0.8) 2.1
Loans (current and non-current) (32.2) - (24.0) 1.5 (54.7)
--------------------------------- --------- --------- ----------- ----------- ----------------
Net debt excluding lease
liabilities ("Net debt") 71.9 3.3 (47.1) (4.5) 23.6
--------------------------------- --------- --------- ----------- ----------- ----------------
Lease liabilities (46.7) (0.3) 11.9 1.6 (33.5)
--------------------------------- --------- --------- ----------- ----------- ----------------
Net debt including lease
liabilities 25.2 3.0 (35.2) (2.9) (9.9)
--------------------------------- --------- --------- ----------- ----------- ----------------
At 1 Non-cash
Analysis of net debt 30 October Acquired Cash flows charges At 30 September
September 2022 GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- --------- ----------- --------- ----------------
Cash and cash equivalents 92.5 0.6 0.1 8.0 101.2
Issue costs 2.0 - 1.5 (0.6) 2.9
Loans (current and non-current) (49.2) - 25.5 (8.5) (32.2)
--------------------------------- --------- --------- ----------- --------- ----------------
Net debt excluding lease
liabilities ("Net debt") 45.3 0.6 27.1 (1.1) 71.9
--------------------------------- --------- --------- ----------- --------- ----------------
Lease liabilities (51.5) (0.2) 13.1 (8.1) (46.7)
--------------------------------- --------- --------- ----------- --------- ----------------
Net debt including lease
liabilities (6.2) 0.4 40.2 (9.2) 25.2
--------------------------------- --------- --------- ----------- --------- ----------------
Non-cash charges against the loan balance represent the effects
of foreign exchange on the financial liability.
On 3 August 2022, the Group entered into an Amendment and
Restatement Agreement ("ARA") with its banking syndicate which
amended its existing US$120m RCF maturing on 10 February 2024, to a
US$220m RCF Facility maturing on 3 August 2026 with an option to
extend maturity to 3 August 2027.
Under the terms of the ARA, the Group's interest margin over the
Secured Overnight Financing Rate ("SOFR") reference interest rate
ranges from 95bps to 195bps and is dependent on the Group's net
leverage. Commitment fees are payable on all committed, undrawn
funds at 35% of the applicable interest margin. The ARA also
contains a US$100m uncommitted accordion facility.
All transaction costs incurred in amending and re-stating the
RCF were capitalised and are being amortised over the extended
maturity period of the facility on a straight-line basis. Currently
all Group borrowings under the RCF are denominated in US Dollars or
Sterling.
12. CASH AND CASH EQUIVALENTS
2023 2022
GBPm GBPm
Cash at bank and in hand 68.5 94.8
Short-term deposits 7.7 6.4
-------------------------- ------- -------
76.2 101.2
-------------------------- ------- -------
The fair value of cash and cash equivalents is GBP76.2m (2022:
GBP101.2m). Restricted cash at 30 September 2023 was GBPNil (2022:
GBPNil).
Short-term deposits have an original maturity of three months or
less depending on the immediate cash requirements of the Group, and
earn interest at the respective short-term deposit rates.
Management consider short term deposits to be subject to an
insignificant risk of changes in value.
13. ACQUISITIONS
Propylon Holdings Ltd ("Propylon")
On 12 July 2023, the Group acquired the entire issued share
capital of Propylon Holdings Limited ('Propylon') and its
subsidiaries for an initial consideration of Euro 30.1m (GBP25.6m)
on a cash and debt free basis. Additional consideration of Euro
12.9m is payable in two equal instalments on the first and second
anniversary of the transaction contingent upon key personnel
remaining employed. Propylon is a component content management
business which compliments both our Tridion and Fonto propositions
and further builds our Content Technology portfolio.
The fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill were as follows:
The provisional fair value of identifiable
assets and liabilities acquired, purchase Fair values
consideration and goodwill were as follows: GBPm
Net assets acquired:
Intangible assets 11.8
Property, plant and equipment 0.1
Right-of-use assets 0.3
Trade and other receivables 4.3
Cash and cash equivalents 3.3
Trade and other payables (1.6)
Corporation tax (0.6)
Deferred tax (1.3)
Lease liabilities (0.3)
---------------------------------------------- --------------
Total identifiable net assets 16.0
Goodwill 12.9
---------------------------------------------- --------------
Total consideration 28.9
---------------------------------------------- --------------
Satisfied by:
Cash 28.9
---------------------------------------------- --------------
The provisional fair values above, are stated before the
finalisation of the purchase price allocation ('PPA'). The
provisional PPA procedures have resulted in an allocation of
GBP8.0m to Customer Relationships, GBP3.1m to Technology assets and
GBP0.7m to Brands with a corresponding reduction in Goodwill.
Additional deferred tax liabilities of GBP1.2m were recognised on
the identified intangible assets. The fair values of trade and
other receivables, and other classes of assets, and their gross
contractual amount are the same.
Propylon contributed revenue of GBP3.1m to Group revenue and
GBP0.4m to profit after tax for the period between date of
acquisition and the balance sheet date. If the acquisition had been
completed on the first day of the financial year, Propylon would
have contributed additional revenues of GBP10.1m and increased
profit after tax for the year by GBP3.5m.
The goodwill of GBP12.9m on acquisition comprises the value of
expected synergies to be realised across future periods. These
derive primarily from the cross sales of RWS products and
integration of services work with the RWS professional service
teams. Integration of Propylon into the RWS Group has commenced and
will continue during FY24.
14. POST BALANCE SHEET EVENTS
On 3 October 2023, the Group acquired ST Comms Language
Specialists Proprietary Limited, a Cape Town based language
services provider for an initial consideration of $675k (GBP558k)
on a cash and debt free basis with additional contingent
consideration of $675k (GBP558k) due two equal instalments on the
first and second anniversary of the transaction.
The Company has continued its share repurchase programme, and
from 1 October 2023 to the date of approval of these financial
statements has purchased on the open market 6,252,443 shares at an
average price of 234.3p.
ALTERNATIVE PERFORMANCE MEASURES
RWS uses adjusted results as a key performance indicator, as the
Directors believe that these provide a more consistent measure of
the Group's operating performance. Adjusted profit is therefore
stated before amortisation and impairment of acquired intangibles,
acquisition costs, share-based payment expense and exceptional
items. The table below reconciles the statutory profit before tax
to the adjusted profit before tax.
Reconciliation of statutory profit before tax to 2023 2022
adjusted profit before tax: GBPm GBPm
Statutory (loss)/profit before tax (10.9) 83.2
-------------------------------------------------- ------- ------
Amortisation of acquired intangibles 38.8 34.4
Impairment losses (Note 9) 62.4 -
Acquisition costs 5.1 2.1
Share-based payment expense 1.8 3.2
Exceptional items (Note 5) 22.6 12.5
Exceptional finance costs (Note 5) 0.3 0.3
-------------------------------------------------- ------- ------
Adjusted profit before tax 120.1 135.7
-------------------------------------------------- ------- ------
Reconciliation of adjusted operating profit to 2023 2022
statutory operating profit: GBPm GBPm
Adjusted operating profit 123.8 138.5
------------------------------------------------ ------- -------
Amortisation of acquired intangibles (38.8) (34.4)
Impairment losses (Note 9) (62.4) -
Acquisition costs (5.1) (2.1)
Share-based payment expense (1.8) (3.2)
Exceptional items (Note 5) (22.6) (12.5)
------------------------------------------------ ------- -------
Statutory operating (loss)/ profit (6.9) 86.3
------------------------------------------------ ------- -------
Cash conversion : 2023 2022
GBPm GBPm
Adjusted profit before tax 120.1 135.7
Adjusted tax charge (29.6) (32.1)
---------------------------- -------- -------
Adjusted net income 90.5 103.6
---------------------------- -------- -------
Net cash inflow 107.5 127.5
Exceptional cash flows 13.7 13.1
Purchase of PPE (3.8) (5.3)
Purchase of intangibles (36.5) (24.3)
Net interest (2.0) (1.3)
Lease liability payments (11.9) (13.1)
---------------------------- -------- -------
Free cash flow 67.0 96.6
---------------------------- -------- -------
Cash conversion 74.0% 93.2%
---------------------------- -------- -------
Organic Revenue
Organic revenue is calculated by adjusting the prior year's
revenues by adding pre-acquisition revenues for the corresponding
period of ownership. 1
2023
2022 2023 Organic
2021 Organic 2022 Organic revenue
Organic revenue Organic revenue 2023 Organic growth/(loss)
revenue1 growth/(loss) revenue growth/(loss) revenue %
IP Services 113.6 (6.4) 107.2 (2.4) 104.8 (2%)
Regulated Industries 171.2 1.8 173.0 (10.5) 162.5 (6%)
Language Services 323.6 18.5 342.1 (12.3) 329.8 (4%)
Language & Content
Technology 121.5 10.6 132.1 4.6 136.7 3%
---------------------- ---------- --------------- --------- --------------- ------------- ----------------
Total 729.9 24.5 754.4 (20.6) 733.8 (3%)
---------------------- ---------- --------------- --------- --------------- ------------- ----------------
1 Includes Liones Holdings B.V. and Propylon Holdings Ltd's
pre-acquisition operating results
Organic revenue at constant exchange rates
Organic revenue at constant exchange rates is calculated by
adjusting the prior year's revenues by adding pre-acquisition
revenues for the corresponding period of ownership, and applying
the 2023 foreign exchange rates to both years.
2022
2022 2022 Organic Organic
Revenue Pre-acq revenue constant
at revenue at constant 2023 currency
FY23 at FY23 exchange Revenue 2023 Organic revenue
rates rates1 rates growth revenue growth
IP Services 109.1 - 109.1 (4.3) 104.8 (4%)
Regulated Industries 179.3 - 179.3 (16.8) 162.5 (9%)
Language Services 354.2 - 354.2 (24.4) 329.8 (7%)
Language & Content
Technology 132.6 5.2 137.8 (1.1) 136.7 (1%)
---------------------- --------- --------- -------------- --------- ------------- ----------
Total 775.2 5.2 780.4 (46.6) 733.8 (6%)
---------------------- --------- --------- -------------- --------- ------------- ----------
1 Includes Liones Holdings B.V. and Propylon Holdings Ltd's
pre-acquisition operating results
Glossary
Adjusted earnings per share or Adjusted EPS - is stated before
amortisation and impairment of acquired intangibles, acquisition
costs, share-based payment expense and exceptional items, net of
associated tax effects.
Adjusted net income - is calculated as statutory profit for the
year adjusted for the Group's amortisation and impairment of
acquired intangibles, acquisition costs, share based payment
expense and exceptional items.
Adjusted operating cash flow - is operating cash flow excluding
the impact of acquisition costs and exceptional items.
Adjusted operating profit - is operating profit before charging
amortisation and impairment of acquired intangibles, acquisition
costs, share-based payment expense and exceptional items. The Group
uses share-based payments as part of remuneration to align the
interests of senior management and employees with shareholders.
These are non-cash charges and the charge is based on the Group's
share price which can change. These costs are therefore added back
to assist with the understanding of the underlying trading
performance.
Adjusted profit before tax or Adjusted PBT - is stated before
amortisation and impairment of acquired intangibles, acquisition
costs, share-based payment expense and exceptional items.
Amortisation of acquired intangibles - is the value of
amortisation recognised on intangibles that were acquired as part
of business combinations, net of the amortisation on those
intangibles charged by the underlying business. This is reconciled
to total amortisation as part of Note 10 in the financial
statements.
Free cash flow - is the net cash inflow from operating
activities before exceptional cash flows, less purchases of fixed
assets, net interest paid and lease liabilities.
Cash conversion - is the free cash flow expressed as a
percentage of adjusted net income.
Constant currency - constant currency measures apply consistent
rates for foreign exchange to remove the impact of currency
movements in financial performance.
EBITDA - is defined as the Group's profit before interest, tax,
depreciation and amortisation.
Net debt - net debt is calculated by taking the Group's cash
balance less any amounts under loans, borrowings and lease
liabilities. The Group presents net debt both including and
excluding the impact of lease liabilities as part of note 16 of the
ARA.
Organic - organic measures exclude the impact of acquisitions
without assuming constant currency and are prepared on a common
basis with the prior year.
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END
FR TBBJTMTTBTAJ
(END) Dow Jones Newswires
December 12, 2023 02:00 ET (07:00 GMT)
Rws (LSE:RWS)
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