Interim Results
RWS Holdings PLC
01 June 2004
FOR IMMEDIATE RELEASE 1 June 2004
RWS Holdings plc
Maiden interim results announcement
For the six months ended 31 March 2004
RWS Holdings plc (RWS), the leading provider of intellectual property support
services (patent translations and technical searches) and technical translations
is pleased to announce its unaudited maiden interim results for the period ended
31 March 2004.
Following the reversal of RWS into the former Health Media Group and the change
of year end to 30 September, pro-forma figures for the year to 31 March 2004 are
provided for comparison with the circular and admission document dated 10
October 2003.
Highlights:
- In November 2003 RWS was admitted to AIM following a reversal into the former
Health Media Group
- The Group achieved record pro-forma sales for the year to 31 March 2004 of
£29.9M (2003 - £25.2M), an increase of 18.6%, underpinned by strong organic
growth
- The Group achieved record pro-forma operating profit before tax (before
goodwill amortisation and net interest receivable) for the year to 31 March 2004
of £5.5M (2003 - £4.4M) an increase of 25%
- The Group continued to increase its share of its growing markets
- The Board recommends a maiden interim dividend of 1.5p per share
- At the period end the Group had net cash of £10.2M, providing a solid platform
for suitable acquisitions
- In April RWS received, for the third time, the Queen's Award for Enterprise -
International Trade
Executive Chairman, Andrew Brode commented:
'RWS is delighted to be reporting record results in its first financial
announcement as a public company. We have experienced strong demand for our
specialist translation services particularly from many of the world's large
multinational corporations.
'The growth drivers for the business remain in place and our order book is ahead
of last year. Provided currencies do not move against us, I am confident that
RWS will continue to make further progress.'
For further information contact:
RWS Holdings plc On 1 June 2004: 020 7067 0700
Andrew Brode, Executive Chairman Thereafter: 01753 480200
Weber Shandwick Square Mile 020 7067 0700
Nick Oborne / Katie Hunt 07884 494112
About RWS:
RWS is a leading provider of intellectual property support services (patent
translations and technical searches) to the medical, pharmaceutical, chemical,
aerospace, defence, automotive and telecoms industries. RWS also provides
specialist technical, legal and financial translation services for areas of
industry outside the patent arena. RWS is based in the UK, with offices in
Europe, New York and Tokyo.
The business was founded in 1982 and has grown strongly through organic
expansion and targeted acquisitions. It has just been recognised, for the third
time, with a Queen's Award for its export performance.
For further information please visit: www.rws.com.
RWS Holdings plc
Chairman's Statement
________________________________________________________________________________
Introduction
I have pleasure in reporting the maiden interim results for RWS Holdings plc,
which show continued strong progress since the reverse takeover of Health Media
Group plc ('HMG') and the Group's successful flotation on AIM on 11 November
2003.
This interim report covers six months' trading by Bybrook Limited (former parent
of RWS Group) plus five months of the former HMG to 31 March 2004. However, in
order to give shareholders a proper insight into the performance of RWS, we have
provided pro forma profit and loss information for the years ended 31 March 2004
and 2003.
During the period, the Group enlarged its share of the growing intellectual
property and technical, legal and financial document translation and patent
search markets through both increasing repeat business from its existing client
base and by developing important new client relationships.
Overview of the Business
RWS is a leading provider of intellectual property support services and
specialist technical, legal and financial translation services. The Directors
believe that it is the largest patent translation specialist in Europe,
translating over 30,000 patents and intellectual property related documents per
annum, with its other major markets being the US and Japan. It serves an
international blue chip client base including companies in the medical,
pharmaceutical, chemical, aerospace, defence, automotive and telecoms industries
as well as patent agents. It comprises two divisions, the RWS Translation
division, which provides patent and document translation, filing and
localisation services and the RWS Information division, which offers a
comprehensive range of patent search, retrieval and monitoring services.
Strategy
The Group's strategy is to grow organically through the exploitation of its
leading position and reputation in the delivery of translation and search
services. In addition, as outlined at the time of the reverse takeover,
selective acquisition opportunities will be considered to enhance growth and
shareholder value.
The Market and Competitive Landscape
Approximately 1,000,000 patent documents are published per annum, 200,000 of
which are published in Europe (Source: European Patent Office) and the
intellectual property market has shown significant growth in recent years, with
patent applications in Europe having doubled over the last ten years.
In the patent translation market, competition is highly fragmented, principally
provided by freelance translators. No competitor currently provides the same
breadth and quality of service in both patent translation and technical search
on a similar scale to RWS and significant barriers to entry exist. RWS is
therefore well placed to benefit from the continued long term growth in these
markets.
In the market place for non-patent technical translations RWS has some corporate
competition as well as competition from freelances, but we are a major player
with an excellent reputation and we continue to gain market share.
Operating Review
We experienced strong demand for our translation services from a broad group of
multinational corporations. The increased level of repeat business reflects the
quality of the Group's offering based on the highly specialist skills of its
translators, many of whom have dual language and technical qualifications, its
rigorous quality control processes, breadth of services and scale of operation.
In particular, our European Translation and Filing service grew significantly
and attracted major new clients, with whom we continue to develop our
relationships.
Our offices in Berlin and Tokyo continued to advance despite the unfavourable
economic climate. Following the full integration of Ad-Ex (Translations)
Limited, acquired in November 2002, it now forms the Group's specialist medical
translations division and is performing well.
Growth in the patent searching business, which represents less than 10% of Group
revenue, was more modest although this division continues to provide the Group
with the ability to offer a comprehensive service in respect of patents and
related documentation.
Following the period end, on April 21, we were delighted to be informed that RWS
had won a Queen's Award for Enterprise in respect of its export performance.
This is the third occasion upon which our efforts have been so recognised; the
award will be a suitable new benchmark for our continued progress.
Financial Review
On an annual pro forma basis, the group achieved record sales and operating
profits. Sales grew by 18.6% to £29.9M (2003: £25.2M), and operating profits
advanced by 25% to £5.5M (2003: £4.4M). After goodwill amortisation (£0.5M) and
net interest receivable (£0.4M), pro forma profit before tax for the year to 31
March 2004 was £5.4M (2003: £4.4M).
Cashflow from operating activities was £2.9M, and net cash at 31 March 2004 was
£10.2M.
Capital expenditure during the period remained at a minimal level of £64K. Net
assets of the Group at the period end were £12.1M.
Dividend
As outlined within the admission document, the Board intends to pursue a
progressive dividend policy in line with the Group's achieved rate of growth in
earnings over time whilst maintaining a suitable level of dividend cover and
retaining sufficient of its earnings to fund the development and growth of the
RWS business.
In accordance with the dividend policy, the directors intend to authorise the
payment of an interim dividend of 1.5p per share on 12 July 2004 to shareholders
on the register on 11 June 2004.
The Board
On admission to AIM, the directors of Health Media, other than Peter Mountford
and myself, resigned. The name was changed to RWS Holdings plc, Liz Lucas and
Mike McCarthy were appointed as Executive Directors and John Ivey (Chief
Executive, Davis Service Group plc) was appointed as Senior Non-Executive
Director.
Prospects and Outlook
The largest proportion of the Group's growth over the years has come from
organic expansion. We believe that the factors driving our growth continue to
be:
- the increasing importance of intellectual property and the need to protect it
via patent filings;
- the growing research and development expenditure by corporates;
- the increasing accessibility of intellectual property information, especially
via the internet, which in turn drives the need for proper and rapid
protection; and
- our specialist skills and reputation.
Our order book is strong and, provided that currencies (in particular Euro to
Sterling) do not move against us, I am confident that RWS will continue to make
further progress. Our balance sheet is also strong, with net cash in excess of
£10M.
Andrew Brode
Executive Chairman
This interim announcement was approved by the Board on 28 May 2004.
RWS Holdings plc
Consolidated profit and loss account
For the six months ended 31 March 2004 (unaudited)
--------------------------------------------------------------------------------
Pro forma Pro forma
year year 6 months
ended ended ended
31 March 31 March 31 March
2004 2003 2004
Note £'000 £'000 £'000
Turnover 2 29,931 25,252 15,640
========== ========== ==========
Operating profit 5,486 4,367 2,786
Goodwill amortization and
write-off 3 (540) (518) (2,187)
Exceptional non-recurring costs 4 - - (184)
---------- ---------- -----------
Total operating profit on ordinary
activities before interest 4,946 3,849 415
Net interest receivable 5 427 597 191
---------- ---------- -----------
Profit on ordinary activities
before taxation 5,373 4,446 606
========== ==========
Taxation credit 6 543
-----------
Profit on ordinary activities after
taxation attributable to
ordinary shareholders 1,149
Dividend 7 (567)
-----------
Retained profit 9 582
===========
Pence
Earnings per 5p ordinary share 8
Basic earnings per share 3.6
Diluted earnings per share 3.2
Adjusted basic 6.1
Adjusted diluted 5.4
All amounts relate to continuing activities.
The accompanying notes form part of these interim unaudited financial statements.
Consolidated statement of total recognised gains and losses
For the six months ended 31 March 2004 (unaudited)
--------------------------------------------------------------------------------
6 months ended
31 March 2004
£'000
Retained profit for the period 1,149
Exchange adjustments on retranslation of net assets of
subsidiary undertakings 27
-------------
Total recognised gains and losses 1,176
=============
RWS Holdings plc
Consolidated balance sheet
At 31 March 2004 (unaudited)
--------------------------------------------------------------------------------
31 March 2004
Note £'000
Fixed assets
Intangible assets 5,722
Tangible assets 587
-----------
6,309
Current assets
Work in progress 619
Debtors 4,681
Cash at bank 10,420
-----------
15,720
Creditors: amounts due within one year (5,375)
-----------
Net current assets 10,345
-----------
Total assets less current liabilities 16,654
Provision for liabilities and charges (4,562)
-----------
Net assets 12,092
===========
Capital and reserves
Called up share capital 9 7,642
Share premium account 9 737
Reverse acquisition reserve 9 (6,453)
Profit and loss account 9 10,166
-----------
Shareholders' funds - equity 9 12,092
===========
The accompanying notes form part of these interim unaudited financial
statements.
RWS Holdings plc
Consolidated statement of cash flow
For the six months ended 31 March 2004 (unaudited)
--------------------------------------------------------------------------------
6 months
ended
Note 31 March
2004
£'000
Cash inflow from operating activities 10 2,946
Returns on investments and servicing of finance
Interest received 405
Interest paid (70)
----------
335
Taxation paid (467)
Capital expenditure and financial investment
Purchase of tangible fixed assets (64)
Sale of fixed asset investments 17,500
----------
17,436
Acquisitions and disposals
Received following demerger of subsidiary undertakings 60
Payments made on the reverse acquisition to
Bybrook shareholders (21,081)
Other payments made on the reverse acquisition (1,396)
----------
(22,417)
Equity dividends paid to Bybrook shareholders (10,000)
-----------
Net cash flow before management of liquid
resources and financing (12,167)
Issue of RWS Holdings plc ordinary 5p shares 21,081
-----------
Increase in cash in period 11 8,914
===========
RWS Holdings plc
Notes
1 Accounting policies
The interim accounts for the six months ended 31 March 2004 are unaudited and do
not constitute statutory accounts in accordance with section 240 of the
Companies Act 1985. The Company changed its accounting reference date from 28
February to 30 September and a copy of the statutory accounts for the seven
months ended 30 September 2003 has been delivered to the Registrar of Companies
and carried a qualified audit report because there was limited evidence in
relation to comparatives and no accounting records were made available in
relation to the principal trading subsidiary which is in liquidation. The
Bybrook group also changed its accounting reference date, from 31 March to 30
September. The last audited accounts of Bybrook filed at Companies House are for
the year ended 31 March 2003 and included the auditor's report which was
unqualified. The accounts of Bybrook for the six months ended 30 September 2003
have been audited but have not yet been filed with the Registrar of Companies;
the audit report thereon will be unqualified and contain no adverse comments.
The financial statements have been prepared under the historical cost convention
and applying accounting policies consistent with those applied in earlier
periods.
On 11 November 2003, the Company, then named Health Media Group plc ('HMG')
became the legal parent company of Bybrook Limited and its subsidiary
undertakings. The substance of the combination was that Bybrook acquired RWS
Holdings plc in a reverse acquisition. As part of the transaction HMG changed
its name to RWS Holdings plc.
Under the requirements of the Companies Act 1985, it would be necessary for the
Company's consolidated accounts to follow the legal form of the business
combination - in that case the pre-combination results would be those of HMG and
its subsidiary undertakings, which would exclude Bybrook. Bybrook's results
would then be brought into the Group from 11 November 2003, being the date of
the acquisition. However, this would portray the combination as an acquisition
of Bybrook by HMG and would, in the opinion of the Directors, fail to give a
true and fair view of the substance of the business combination. Accordingly,
the Directors have adopted reverse acquisition accounting as a basis of
consolidation in order to give a true and fair view, which is necessary as the
Companies Act 1985 does not allow this method of accounting. In invoking the
true and fair override, the Directors note that reverse acquisition accounting
is endorsed under International Accounting Standard 22 and that the Urgent
Issues Task Force of the UK's Accounting Standards Board considered the subject
and concluded that there are instances where it is right and proper to invoke
the true and fair override in such a way.
As a consequence of applying reverse acquisition accounting, the results for the
six months ended 31 March 2004 comprise the results of Bybrook for its six
months ended 31 March 2004 plus those of HMG from 11 November 2003. As severe
long-term restrictions substantially hinder the rights of the Group over Pang
Health Limited, which is in liquidation, it has been excluded from the
consolidation in accordance with Financial Reporting Standard 2, 'Accounting for
subsidiary undertakings'. The Group's investment in Pang Health Limited has been
recorded as £nil.
Goodwill arose on the difference between the fair value of HMG's share capital
and fair value of its net liabilities at the reverse acquisition date. This
goodwill has been written-off in the six months ended 31 March 2004, because HMG
has no continuing business and therefore this goodwill has no intrinsic value.
Other goodwill arising on consolidation and purchased goodwill are capitalised
and amortized through the profit and loss account over the Directors' estimate
of its useful economic life that does not exceed 20 years.
The pro forma figures are for Bybrook and provide a direct comparison with the
disclosures in the Circular to Shareholders issued on 10 October 2003.
Comparatives for the results for the six months ended 31 March 2004 are not
provided because in the opinion of the Directors these would not be meaningful
as they would include the results of the now demerged loss making sub-group and
a substantial goodwill write-off in relation thereto. The financial statements
in future will be issued with comparatives. It should be noted that at 30
September 2004, in line with statutory reporting requirements, the comparatives
will be the figures in the audited accounts of Bybrook Limited for the six
months ended 30 September 2003. The interim report to 31 March 2005 will reflect
the actual results shown on these financial statements.
2 Segment information
6 months ended
31 March 2004
£'000
Turnover by class of business
Translation and localisation services 14,183
Information services 1,457
------------
15,640
============
The tables below show information by material geographic areas or countries and
all turnover relates to external customers.
Turnover by geographic location of subsidiary undertaking
United Kingdom 13,969
Continental Europe 233
Japan 1,332
United States of America 106
------------
15,640
============
Turnover by geographic market in which customers are located
United Kingdom 2,494
Continental Europe 10,537
Japan 763
United States of America 1,738
Other 108
------------
15,640
============
Total assets by location of subsidiary undertaking
UK 20,977
Others 1,052
------------
22,029
============
Net operating assets by location of subsidiary undertaking
UK 9,942
Others 753
------------
10,695
Non-operating assets 1,397
------------
12,092
============
Non-operating assets include cash and short-term borrowings, and non-operating
debtors and creditors not attributable to individual business segments.
Profit before taxation by business sector and location of subsidiary undertaking
In the opinion of the Directors, disclosure would be seriously prejudicial to
the interests of the Group.
3 Goodwill amortization and write-off
On 11 November 2003, Bybrook Limited completed its reverse acquisition of Health
Media Group plc which then changed its name to RWS Holdings plc. Goodwill
arising on the reverse acquisition represents Health Media Group plc's share
capital of 462,095 ordinary shares at the placing price of 112.54p plus
5,753,082,252 deferred shares at nominal value of 0.001p plus acquisition
expenses less the fair value of Health Media Group plc net liabilities acquired.
However, the rights of the deferred shares which are not listed or quoted on any
stock exchange, are minimal, thereby rendering them effectively valueless. An
application to the Court to effect a capital reduction by cancelling these
shares for no consideration is in progress.
£'000
Cost of the acquisition 520
Acquisition related expenses 1,069
---------
Total consideration 1,589
Less fair value of Health Media Group plc's net
liabilities acquired
Current assets
Debtors 18
Cash 1
---------
19
Current liabilities
Trade creditors (10)
Accruals (336)
---------
(327)
---------
Goodwill 1,916
=========
This goodwill has been written-off in the six months to 31 March 2004 because
Health Media Holdings plc has no continuing business and therefore the goodwill
has no intrinsic value. The amortization of goodwill arising on consolidation
and other goodwill amounted to £271,000.
4 Exceptional non-recurring costs
On 7 October 2003, Bybrook sold the entire share capital of subsidiaries with
operations based in California to its shareholders. The terms of this agreement
were set out in the Admission document sent to shareholders on 10 October 2003.
A loss arose on the disposal of this sub-group.
The Group incurred certain non-recurring expenses in connection with the reverse
acquisition which have been written-off to Profit and Loss Account. These costs
were either indirectly related to the reverse acquisition or charged in a
subsidiary of RWS Holdings plc. As a result they are not part of the calculation
of goodwill arising on the reverse acquisition as set out in Note 3.
5 Net interest receivable
6 months ended
31 March 2004
£'000
Interest receivable 258
Interest payable (67)
----------
191
==========
6 Taxation
6 months ended
31 March 2004
£'000
Corporation tax at 30% 769
Utilised overseas losses in prior periods (1,400)
-----------
(631)
Overseas tax 88
-----------
Total current tax credit (543)
===========
Certain overseas trading losses in prior years within the Bybrook group were
available for group relief but had not been allowed for in deriving the tax
charge. The quantum now has been agreed and the effect is recognised in the
Profit and Loss Account. No taxation asset in respect of these losses had been
recognised prior to 31 March 2004.
7 Dividend
6 months ended
31 March 2004
£'000
Interim dividend payable of 1.5p per share on each 5p
ordinary share 567
===========
8 Earnings per share
6 months ended
31 March 2004
£'000
Earnings per share are based on the group profit for the six
months and a weighted average of 31,562,148 ordinary shares in
issue during the period.
Basic earnings per share 3.6
Goodwill amortization and write-off 6.9
Exceptional tax credit from prior year trading losses (4.4)
-----------
Adjusted earnings per share 6.1
===========
Number of shares
Diluted earnings per share are based on the group profit for
the period and a weighted average of ordinary shares in issue
during the period calculated as follows:
In issue 31,562,148
Dilutive potential ordinary shares
arising from unexercised share
options 4,533,856
-----------
36,096,004
===========
9 Movement in shareholders' funds/(deficit)
Reverse
Share Share acquisition Profit and Shareholders'
capital premium reserve loss account funds
£'000 £'000 £'000 £'000 £'000
At beginning of
period - 1,405 - (5,875) (4,470)
Shares held by
existing HMG
shareholders 5,776 737 - - 6,513
Shares issued to
Bybrook shareholders 929 - - - 929
Shares issued for
cash 937 - - - 937
Dividend from
Bybrook on completion
of the reverse
acquisition - - - 15,432 15,432
Reserve adjustments
arising on the
reverse acquisition - (1,405) (6,453) - (7,858)
Retained profit
for the period - - - 582 582
Exchange movements - - - 27 27
------- -------- --------- --------- ----------
At end of period 7,642 737 (6,453) 10,166 12,092
======= ======== ========= ========= ==========
10 Net cash flow from operating activities
6 months ended
31 March 2004
£'000
Operating profit 415
Depreciation of tangible assets 135
Amortization of intangible assets 271
Goodwill write-off 1,916
Loss on sale of subsidiary undertaking 128
Decrease in work in progress 378
Increase in debtors (60)
Decrease in creditors (264)
Other non-cash movements 27
------------
Net cash inflow from operating activities 2,946
============
11 Reconciliation of net cash flow to movement in net funds
Cash Overdrafts Net funds
£'000 £'000 £'000
Net funds at beginning of the period 2,757 (1,546) 1,211
Increase in cash in the period 7,663 1,251 8,914
Transferred on demerger of subsidiary
undertakings - 62 62
-------------------------- ---------
Net funds at end of period 10,420 (233) 10,187
========================== =========
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