REG - RWS Holdings PLC - Final Results
12/12/2024 07:00
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RNS Number : 8390P RWS Holdings PLC 12 December 2024
For immediate release 12 December 2024
RWS Holdings plc
Results for the year ended 30 September 2024
A return to growth in the second half, driven by encouraging performance
in AI-led solutions
RWS Holdings plc ("RWS", "the Group"), a unique world-leading provider of
technology-enabled language, content and intellectual property services, today
announces its results for the year ended 30 September 2024 ("FY24").
Financial overview
2024 2023 Change
Revenue £718.2m £733.8m -2%
OCC¹ revenue 0%
Gross margin 46.9% 46.3% +60bps
Adjusted profit before tax² £106.7m £120.1m -11%
Profit/(Loss) before tax £60.0m £(10.9)m -
Adjusted basic earnings per share² 21.6p 23.3p -7%
Basic earnings per share 12.8p (7.1)p -
Dividend:
Proposed final 10.0p 9.80p 2%
Total for year 12.45p 12.20p 2%
Cash conversion² 51% 74% -23% pts
Net (debt) / cash³ £(12.9)m £23.6m -£35.2m
Group highlights
· Revenues declined 2% on a reported basis. The Group returned to
growth in the second half of the year with organic constant currency ("OCC")¹
revenue up 2% compared with -2% in H1, continuing the improving trend seen
since the second half of FY23, driven by:
· Strong growth in our AI-led solutions, particularly TrainAI,
Language Weaver and Evolve
· Significant contract wins, very high client retention across all
divisions (95% repeat revenue in services) and strong improvement in the
Group's NPS client satisfaction score to +48 (FY23: +42)
· Language Services and IP Services delivered encouraging growth
for the full year:
· Language Services OCC¹ revenue grew 3% (1% decline on a reported
basis), driven by delivery of TrainAI programmes, further contract wins for
Evolve and improving trends beyond our major technology client base, supported
by good growth in APAC
· IP Services OCC¹ revenue grew 3% (2% decline on a reported
basis), reflecting a good Eurofile performance and an increasing contribution
from other parts of the IP lifecycle, particularly research and renewals
· Significant improvements in H2 in both Regulated Industries and
Language and Content Technology:
· Regulated Industries delivered -2% OCC¹ revenue in H2 as
corrective actions had a positive impact, compared with a 12 % decline in H1
(full year revenues declined 10% on a reported basis). Linguistic Validation,
one of our growth initiatives, continued to perform strongly with double-digit
OCC¹ growth for the year
· Language and Content Technology revenues grew 4% on a reported
basis. The division delivered mid-single digit OCC¹ revenue growth in H2,
compared with a 3% contraction in H1, driven by strong revenues in Language
Weaver, including securing its largest ever three-year contract in Q4,
Propylon performing ahead of plan and material improvement elsewhere in
content technology
Financial performance
· Revenues were flat year-on-year on an OCC¹ basis and declined 2%
on a reported basis, due to FX
· Gross margin improved to 46.9% (FY23: 46.3%), reflecting group
restructuring and broader cost control efforts and continued efficiency
benefits from greater use of the LXD, more than offsetting FX headwinds and
adverse mix
· Adjusted profit before tax ("Adjusted PBT")² declined 11%;
adjusted PBT² margin of 14.9%, down from 16.4% in FY23, principally
reflecting reduced activity in certain higher margin end markets, compounded
by adverse effects from foreign exchange, partially mitigated by efficiency
gains
· Reported profit increased to £60.0m, driven by lower impairment
charges and lower exceptional charges primarily related to group
restructuring, as well as the profit on sale of PatBase
· The Group further strengthened its balance sheet with the disposal
of its interest in PatBase, receiving £25m in initial cash consideration in
May and £5m of deferred consideration in November
· 51% cash conversion², driven by peak investment in transformation
and working capital movement
· Modest net debt³ of £12.9m at 30 September 2024 (FY23: £23.6m
net cash) includes payment of £46m of dividends, £30m of share repurchases,
£46m of capex and £25m from the sale of PatBase
· Recommended final dividend of 10.0p per share (FY23: 9.80p),
giving total dividend of 12.45p (FY23: 12.20p), a 2% increase
Significant strategic progress
· Transformation programme, efficiency actions and investments in
our growth initiatives supporting resilience and momentum:
· AI-centred products and services account for approximately 25% of
Group revenues, with an OCC¹ growth rate of approximately 7% and gross margin
of 45%
· £28m of incremental revenue in the year from growth initiatives,
including TrainAI and Linguistic Validation
· In Q3 we launched HAI, a secure "human in the loop" self-service
platform
· SaaS now represents 39% of divisional licence revenues (FY23: 34%)
and is established as a tailwind, delivering greater revenue visibility
· Language eXperience Delivery ("LXD") production platform
continues to drive efficiency across the Group
· Now managing 72% of Language Services, Regulated Industries &
IP Services content; approximately 55% of this content is now
machine-translated first by Language Weaver
· LXD technology and expertise continues to be used to manage large
communities of high-quality annotators and validators to enable TrainAI
revenue growth; RWS in-house language specialists also play a critical role in
developing and training our AI tools
· Capex peaked at £46m, in line with strategy, to support growth
initiatives and drive transformation; HR transformation programme successfully
completed and, post year end, we successfully launched the first phase of the
finance ERP system and completed the transition to a global finance shared
service model
Current trading and outlook
· We anticipate further momentum from TrainAI in FY25, building on
successful sales of the service to clients outside our major technology
accounts
· We are encouraged by a strong pipeline for our AI-focused
offerings which is also starting to deliver internal efficiency benefits
· Trading in the early months of FY25 has been in line with the
expectations set out in our trading update in October
· We expect to deliver modest organic constant currency revenue
growth in FY25, with growth in volumes expected to more than offset ongoing
price pressure
· On 26 November the Group announced the appointment of Benjamin
Faes as Chief Executive Officer, succeeding Ian El-Mokadem with effect from 6
January 2025
Ian El-Mokadem, CEO of RWS, commented:
"Having driven significant improvements in performance in the second half, the
Group returned to growth on an organic constant currency basis. Client
retention levels have remained high, client satisfaction has improved and we
have continued to win significant new accounts.
"Our AI-centred products and services now account for £180m of Group
revenues, demonstrating their clear traction. With strong growth in TrainAI
and Language Weaver and a number of significant wins for Evolve, we remain
confident that AI represents a net opportunity for the Group. We have also had
another year of growth in Linguistic Validation and cross selling has been a
highlight, illustrated by a significant win for the Content Technology
business in Regulated Industries at the end of the year.
"Whilst our market has been more challenging than anticipated when we set out
our medium-term strategy in 2022, it is clear that our investments in growth
and AI and the efficiency actions we have taken in line with that strategy are
allowing us to pivot successfully towards both AI-led and more specialist
solutions. We continue to invest in sales effectiveness, rationalising our
translation management technology portfolio and transformation to create an
even more scalable platform. This, combined with our innovative solutions and
continued focus on efficiency, enabled by our unique LXD platform, means we
are well placed to emerge from the current market transition in a position of
strength and as a leader.
"We remain confident in the long-term growth drivers for our products and
services, underpinned by the unique combination of human and artificial
intelligence that our proprietary technology platform and in-house linguistic
expertise offers.
It has been a privilege to lead our strong, talented and uniquely diverse team
who work hard every day to deliver outstanding levels of service and
innovative solutions to our highly valued global client base. I am pleased
that I will be able to hand over a growing, highly AI-enabled business to an
excellent successor in January and wish all of my colleagues every success as
they continue to develop our strong and market-leading business".
Notes:
¹ Adjusted to reflect a like-for-like comparison between reporting periods
and assumes constant currency across both reporting periods.
² 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 performance indicators can be found in the Appendix.
³ Net cash/net debt comprises cash and cash equivalents less loans but before
deducting lease liabilities.
⁴ The latest Group-compiled view of analysts' expectations are available
here - consensus
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.
For further information, please contact:
RWS Holdings plc
Ian El-Mokadem, Chief Executive Officer 01753 480200
Candida Davies, Chief Financial Officer
MHP (Financial PR advisor) rws@mhpgroup.com (mailto:RWS@mhpgroup.com)
Katie Hunt / Eleni Menikou 020 3128 8100
07884 494112
Deutsche Numis (Nomad & Joint Broker)
Stuart Skinner / William Wickham 020 7260 1000
Berenberg (Joint Broker)
Ben Wright / Toby Flaux / Milo Bonser 020 3207 7800
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
(https://protect.checkpoint.com/v2/___http:/www.rws.com___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzpmNjJiOGZiNzE4ODc2Y2QyMGJlNzgyOGYzOGRmYzNiYjo2OjczYzc6OWI2MmQ4YmYxNGM5ZmI4OTcwN2Q1YjQyM2M2MTFmMWIwNDZkM2NkYzFmMjgxY2M5MzRjNTQxY2M3MTEyN2VjMTpwOlQ6Tg)
.
Chairman's Statement
In FY24 we continued to invest in line with our strategy and the changing
nature of our industry, particularly the growing role that AI is playing. That
response was demonstrated by the launch of Evolve, our pioneering linguistic
AI solution, the further adoption of AI features and functionality into our
software products and the increasing deployment of AI across our operations.
In our Language eXperience Delivery ("LXD") platform approximately 55% of
words are machine-translated first and AI-related products and services now
account for a quarter of Group revenues.
The Group continues to operate in attractive markets with a combined global
size estimated at £49bn, where our specialist knowledge, in-house technology,
proprietary linguistic data, security, reputation and scale are critical
enablers for our clients embarking on an AI-influenced strategy. Our results
reflect encouraging progress in a number of areas and demonstrate that we are
well positioned for clients' increased appetite to harness AI to meet their
language and content needs.
PERFORMANCE
In FY24 the Group delivered £718.2m of revenues, a decline of approximately
2% compared with the previous year (FY23: £733.8m). This reflected a
combination of good progress with our growth initiatives, particularly TrainAI
and Linguistic Validation and recovery in some end markets, offset by
continuing reduced activity in others. We were pleased to see a return to
underlying growth during the year - on an organic constant currency ("OCC")
basis, RWS grew 2% in the second half, bringing FY24 in line with the prior
year. Both Language Services and IP Services delivered encouraging growth for
the full year along with significant improvements in both Regulated Industries
and Language & Content Technology in the second half. In parallel, we have
continued to focus on making the business more efficient and delivering our
planned investments in transformation.
Reported profit before tax for the year was £60.0m (FY23: £(10.9)m).
Adjusted profit before tax declined to £106.7m (FY23: £120.1m), reflecting
our ongoing investments in growth and transformation, foreign exchange
headwinds and unfavourable client and business mix in some parts of the Group,
offset by the benefits of continued focus on cost efficiency and an increasing
proportion of work delivered by the LXD.
The Group continues to have a strong balance sheet, with net assets of
£899.6m (FY23: £987.3m) at 30 September 2024. This included net debt
(excluding lease liabilities) of £(12.9)m (FY23: net cash of £23.6m).
PEOPLE AND BOARD
At 30 September 2024, RWS employed 9,059 full-time equivalents (FY23: 7,910)
across 62 locations in 34 countries. This increase is driven by the resources
recruited to support the increase in TrainAI business during the year. Our
agile working policy has successfully balanced regular face-to-face
interactions for effective collaboration with the benefits of technology,
leading to significant time and energy savings by reducing commuting. Amid
cost-of-living challenges in many regions, our commitment to flexible working
has been well-received globally. Additionally, we continued to assess the
effectiveness and operating costs of our locations and reduced the number of
offices by approximately 7%, resulting in further savings in property and
related costs.
Despite challenging global macroeconomic and political conditions, our Group
has navigated the year with resilience and dedication. On behalf of the Board,
I extend our gratitude to all our teams worldwide for their unwavering
commitment to delivering high-quality services and products to our clients.
Additionally, the Group has continued to provide support to colleagues
affected by the ongoing conflicts in Ukraine and the Middle East.
Paul Abbott and Graham Cooke joined RWS as Independent Non-executive Directors
with effect from 1 January 2024. Their combined breadth of experience in
technology platforms and solutions, implementing organisational change and
driving business growth in customer-focused, international organisations
further strengthens the Group's highly experienced Board.
Paul Abbott is currently Chief Executive Officer of American Express Global
Business Travel, the global software and services company for travel and
expense for more than 20,000 businesses. Since 2019 Paul has led Amex Global
Business Travel through several strategic acquisitions, transforming the
company's product and technology solutions and driving significant growth.
Graham Cooke was the founder and Chief Executive Officer of Qubit, a leading
SaaS company in the e-commerce space, providing AI-personalised shopping
recommendations to more than a billion shoppers per month. He oversaw the sale
of Qubit to Coveo Solutions in 2021. Prior to Qubit, Graham was one of the
first European employees at Google, working on its Ad Platform and Google
Analytics products.
On 12 January 2024 Lara Boro, Senior Independent Director, informed the Board
of her intention to step down as a Non-executive Director at the Annual
General Meeting on 22 February after six years on the Board. We would like to
extend a warm thank you to Lara for all her support over the years. David
Clayton succeeded Lara Boro as Senior Independent Director.
On 23 May Ian El-Mokadem informed the Board of his intention to step down as
Chief Executive Officer and Director of the Company to pursue the next stage
of his career. On 26 November the Group announced the appointment of Benjamin
Faes as Chief Executive Officer, succeeding Ian El-Mokadem, with effect from 6
January 2025.
We are grateful for his leadership of RWS during a pivotal time for the
business and the industry. He, and our broader leadership team, have made
considerable progress in line with the Group's strategy. We wish Ian all the
very best in his future.
SUSTAINABILITY AND ESG
Our commitment to uphold the highest standards in environmental, social and
corporate governance is the foundation for all our business activities and
stakeholder engagements. We are proud to have achieved significant milestones
in the past year.
On 18 June 2024, RWS announced that the Science Based Targets initiative
("SBTi") had validated our commitment to reduce Scope 1 and 2 GHG emissions by
54.6% by the end of the year ending 30 September 2033, and Scope 3 carbon
emissions by 61.1% per million GBP value added within the same time frame. We
also announced on 11 December 2023 that RWS had been awarded a silver medal by
EcoVadis for its sustainability achievements. We are proud of these
significant achievements which underscore our commitment and journey towards
being a sustainable business.
The RWS Foundation made more than £200,000 in donations over the year,
supporting three programmes - the RWS-Brode Scholarship Programme with the
University of Manchester, together with our ongoing work with CLEAR Global,
and the development work to make Trados an accessible tool for those with
visual impairments.
DIVIDEND
The Group continues to deliver against its progressive dividend policy and
this marks the 21st year in succession that we have increased the dividend.
The Group remains cash generative and, while our investment programme has
meant a higher level of capital expenditure in FY24, we continue to focus on
cash conversion and managing our net cash/net debt position effectively.
The Board therefore recommends a final dividend of 10p per share. Together
with the interim dividend of 2.45p per share, this will result in a total
dividend of 12.45p for the year, an increase of 2% compared with FY23. Subject
to final approval at the AGM, the final dividend will be paid on 14 February
2025 to shareholders on the register at 17 January 2025.
SUMMARY
Whilst our market has been more challenging than anticipated when we set out
our medium-term strategy in 2022, it is clear that ongoing investments in our
growth initiatives and the efficiency actions we have made in line with that
strategy have enabled a more resilient performance.
We are uniquely positioned to capitalise on advancements in AI and technology.
The demand drivers for our products and services are well-established and,
combined with the ongoing success of our growth initiatives, we see clear
opportunities ahead to emerge from the current market transition in a position
of strength. The Group maintains a robust balance sheet, ensuring our capacity
to be able to invest to ensure our long-term competitiveness.
Our global presence, diverse market portfolio and excellent client retention
rates further strengthen our confidence in the Group's long-term potential.
Our innovation in AI is a key pillar of our strategy, ensuring we stay ahead
in a rapidly evolving landscape.
Julie Southern | Chairman
11 December 2024
Chief Executive Officer's Review
We have continued to make solid progress in relation to the strategy we
launched in early 2022. Navigating a series of market headwinds over the last
18 months, we have returned the business to growth on an organic constant
currency ("OCC") basis in the second half of FY24, with significant
improvements in performance across the Group during this period. We have
continued to invest in sales effectiveness, transformation and improved
efficiency to help ensure that we are well placed to emerge from the current
market transition in a position of strength.
Client satisfaction remained high, with our 12-month rolling client Net
Promoter Score at +48, continuing an encouraging trend as our Voice of the
Customer programme further matures (FY23: +42). We have continued to win new
logos across multiple end markets including e-commerce, food & beverages,
government, legal services, medical devices, pharmaceutical and technology.
AI-based solutions and functionality are central to our future success and, as
an AI-native organisation, we have long-established capabilities across the
content value chain. With AI-related products and services now accounting for
a quarter of the Group's revenues, RWS is both an established industry leader
and one of the principal AI innovators.
PROGRESS IN RELATION TO OUR MEDIUM-TERM STRATEGY
AI and Technology
In March 2022, when we launched our medium-term strategy, we highlighted the
critical role that technology and AI would play in the future of our business
and that of our clients. As anticipated in our strategy, within a year
generative AI had become mainstream with the launch of several free-to-use
solutions. With our long history in AI innovation, we continue to capitalise
on the opportunities presented by AI and believe strongly that we are well
positioned to support clients on their AI journey.
We achieved high levels of repeat revenue with existing clients, supported by
some significant new wins and further incremental revenue contributions from
our growth initiatives, particularly TrainAI and Linguistic Validation, as
well as a very strong year for Language Weaver. The launch of Evolve in early
2024 experienced positive traction with clients. Evolve, our patent-pending
and award-winning linguistic AI solution, utilises a private large language
model in combination with Language Weaver to significantly reduce the time it
takes to achieve near human-like translation quality. We have secured a number
of substantial client wins and have started to see some efficiency benefits
from deploying the solution internally.
In June we launched HAI, a digital self-service platform designed to
streamline the translation experience by combining human expertise and AI,
simplifying project management, offering real-time cost visibility and
security and ensuring high-quality translations, all in one place.
We made significant progress with one of our growth initiatives, TrainAI. We
invested in people, marketing and sales, and further developed the scope of
our TrainAI community, balancing our established network of 100,000+ freelance
members with some in-house recruitment to effectively meet increased demand
for the service. We also transformed our approach to managing the freelance
community, using the Language eXperience Delivery's capabilities and expertise
to successfully recruit, onboard, train, manage and pay community members.
In September we announced a strategic collaboration agreement with Amazon Web
Services ("AWS") to bring to market new solutions powered by generative AI.
Under the agreement RWS and AWS will develop generative AI solutions, enabling
clients to increase efficiencies when creating, translating and delivering
content. RWS is working with AWS on 25 new product features and multiple new
proofs of concept.
People are always at the heart of our technology developments and
partnerships. This approach is reflected in our Genuine Intelligence™
philosophy, bringing together human and artificial intelligence in way that
delivers real value for our clients. Genuine Intelligence enables us - and our
clients - to work confidently with AI, to mitigate the risks of naïve AI
implementation and to unlock the true potential of AI for business and
society.
Transformation
We continued to invest in our transformation in line with our medium-term
strategy and remain committed to our planned investments in sales and
marketing, R&D and consolidation of our operating platforms that will
underpin future growth, efficiency and margin development. We successfully
completed our HR transformation by the end of 2024, with Dynamics 365 for
Human Resources being adopted across the Group. We were also pleased to launch
iCIMS, our new Applicant Tracking System, which delivers a One RWS recruitment
process, enabling effective hiring and a better candidate and colleague
experience through automation, self-service and simplified processes.
In finance the first phase of the shared service centre implementation has
been completed. We also have made good progress on moving a greater proportion
of translation volumes into the Language eXperience Delivery platform
(including some IP Services content) and we have rationalised the supply chain
for our freelance network of language specialists, with the resulting
efficiency benefits already supporting margin. Looking forward, we will
continue the transformation programmes in finance and IP Services and look to
access new opportunities in the further development and scaling of our AI
propositions, end-to-end optimisation and legal entity rationalisation.
Acquisitions and Divestments
Through the acquisition of Cape Town-based ST Comms Language Specialists
Proprietary Limited ("ST Communications") early in the year, we were delighted
to establish a local presence and operations in Africa, further strengthening
RWS's ability to support clients with rarer languages. The integration of ST
Communications marks a significant milestone for RWS and will enable clients
to further their reach into the African market with locally-based talent and
linguistic expertise across an additional 40+ African languages.
In May the Group further strengthened its balance sheet with the disposal of
its interest in a revenue and cost sharing arrangement, together with certain
associated assets, relating to a patent information resource business known as
'PatBase,' receiving £25m in cash in May, with the remaining £5m paid in
November 2024.
The Group continues to seek acquisitions which can accelerate delivery of our
medium-term plans. Our disciplined M&A programme is focused on selectively
acquiring complementary businesses which enhance our organic growth profile,
including new capabilities in AI technology and technology-enabled language
services in text and multimedia formats, assets that broaden our natural
language processing capabilities, data annotation solutions and localisation
assets with attractive end market exposure.
OPERATING REVIEW
Language Services
First half OCC growth momentum maintained, underpinned by delivery of several
TrainAI programmes and further Evolve wins
The Language Services division represented 46% of Group revenues in the year
(FY23: 45%). Revenues of £327.1m were 0.8% lower on a reported basis (FY23:
£329.8m) and increased by 2.5% on an OCC basis.
We were pleased to see the return to growth on an OCC basis, driven by a good
performance in Enterprise Services, particularly in TrainAI, where our global
technology clients are increasingly benefiting from our data services
expertise. Clients are attracted to the enterprise-grade security and privacy
that RWS offers, as well as its strong ethical practices in the sourcing and
quality checking of data for training their AI models.
We also won our first TrainAI contracts from clients in other parts of the
Group and, with an encouraging pipeline, we anticipate TrainAI will make a
further positive contribution to revenue growth in FY25.
We are also encouraged by the impact of Evolve on clients. Evolve, our
pioneering linguistic AI solution, combines RWS's language services expertise
with our translation management system (Trados Enterprise) and neural machine
translation technology (Language Weaver), alongside language
specialist-trained quality estimation and a fine-tuned private large language
model. After a successful beta program in the second quarter of FY24 in which
a number of clients participated, we are now receiving revenues from Evolve
contracts with major clients. We anticipate Evolve continuing to play an
important part in our AI-enabled services portfolio.
We made good progress in respect of growth initiatives in the division during
the period. In the third quarter we successfully launched HAI, a digital
self-service platform which streamlines the translation experience and
combines the best of our human expertise and AI capability. We anticipate HAI
making an important contribution to FY25 performance. In eLearning we
increased the number of pilots and opportunities across all verticals.
Once again, we saw high levels of client retention and satisfaction in the
division, a number of new client wins in the technology and e-commerce sectors
and a strong organic performance in the Asia-Pacific region.
Operating profit was £25.4m (FY23: £18.8m). Adjusted operating profit was
£39.6m (FY23: £39.4m), reflecting changes in service and language mix offset
by strong cost control.
Regulated Industries
Impact of corrective actions delivered strong second half recovery,
accompanied by continued progress with Linguistic Validation
The Regulated Industries division accounted for 20% of Group revenues in the
year (FY23: 22%). Revenues of £146.5m decreased by 9.8% on a reported basis
(FY23: £162.5m) and by 6.8% on an OCC basis.
In Regulated Industries the early signs of recovery highlighted in the Group's
mid-year results were maintained, with OCC revenues meaningfully improved in
the second half compared with the prior year. While a number of our larger
life science clients implemented cost-cutting exercises and there was no
repeat of the boost in FY23 from compliance work to meet PRIIPS regulatory
changes in the financial services segment, the corrective actions that we have
taken are having a positive impact. By contrast, Linguistic Validation, one of
our growth initiatives and a service used by clients at the clinical phase of
therapy development, again performed strongly over the course of the year -
pointing to improved demand in the regulatory and launch phases of life
sciences in due course.
In FY24 we were pleased to have secured our first Evolve contract with a large
life sciences client. We finished the year with an important technology win in
the Life Sciences division, demonstrating both our improving cross-selling
effectiveness and the willingness of life sciences clients to embrace
technology solutions.
Operating profit was £5.9m (FY23: £9.1m). Adjusted operating profit
decreased to £19.8m (FY23: £22.9m), reflecting the reduction in topline
revenue and adverse foreign exchange impact, partially mitigated by increased
use of LXD and cost actions taken through the year.
Language & Content Technology
Second half recovery driven by improving performance in content technology,
alongside strong year in Linguistic AI, particularly Language Weaver
The Language and Content Technology ("L&CT") division accounted for 20% of
Group revenues in the year (FY23: 19%). Revenues of £142.3m were 4.1% higher
on a reported basis (FY23: £136.7m) and decreased by 0.7% on an OCC basis,
reversing the first half decline to deliver modest OCC growth in H2.
Divisional performance was underpinned by continued strong revenues in
Language Weaver (our long-established AI-centred machine translation
solution), Propylon performing ahead of plan and improved second half
performance elsewhere in the content technology segment. We saw new logo wins
across a range of end markets, including financial services, government, media
and retail. In the final quarter we secured our largest ever three-year
Language Weaver contract.
We achieved an 18% growth in SaaS licence revenues in the period compared with
FY23 and SaaS revenues as a percentage of total licence revenues in the
division increased to 39% (FY23: 34%), demonstrating the continued shift in
our licence models to SaaS, linked to the increased R&D investments in our
technology products. This transition to SaaS builds long-term value for FY25
and beyond by supporting greater stability and predictability of future
revenue streams.
The division's in-house R&D team led the development of the Evolve
solution and continues to roll out the range of language pairs available
through Evolve, with 22 language pairs expected to be available by the end of
2024. In parallel, having announced end of life timelines for the majority of
our legacy translation management products in March 2024, we have continued to
work on the transition programme to Trados Enterprise for clients of these
products, with 29% of transitions completed so far.
We also launched Trados Studio 2024 in June, the latest version of our
computer-assisted translation tool for individual users. Delivering access to
cutting-edge AI, multiple usability improvements and enhanced accessibility
features, and with Language Weaver as a standard feature, Trados Studio 2024
continues to address the diverse, evolving needs of users and reinforces the
position of Trados as the backbone of the industry.
The release of Tridion Docs 15.1 included a host of new AI features, including
Tridion Docs Genius, a new AI-driven knowledge portal that helps employees,
customers and partners find the information they need more quickly across vast
amounts of information. In addition, a new Draft Companion feature, based on
generative AI, acts as a second pair of eyes for the author by spotting and
fixing grammar and spelling issues, rephrasing sentences and phrases and
summarising text.
The launch of Contenta Cloud S1000D in September benefits our clients in
aerospace and defence, allowing them to more effectively create, manage and
publish technical documentation.
Operating profit was £18.5m (FY23: £(40.9)m). Adjusted operating profit was
at £34.2m (FY23: £37.0m), reflecting the higher proportion of SaaS revenues,
ongoing planned investments, adverse foreign exchange impact and the Propylon
acquisition.
IP Services
Return to OCC growth driven by strong Eurofile revenues and good growth in
renewals
The IP Services division represented 14% of Group revenues in the year (FY23:
14%). Revenues of £102.3m were 2.4% lower on a reported basis (FY23:
£104.8m) and 3.3% higher on an OCC basis.
OCC revenue growth in IP Services division was driven by a strong performance
in the Eurofile segment with many patent filers remaining committed to the
existing arrangements over the Unitary Patent. The IP Services division
secured several new client wins and we saw growth in patent renewals work,
particularly in China and Japan. With an expanded product offering in IP
recordals and docketing, we further demonstrated our ability to serve clients
across the entire IP lifecycle, reflecting an improved sales structure and
effectiveness.
Operating profit was £33.3m (FY23: £21.6m). Adjusted operating profit was
£26.9m (FY23: £27.7m), reflecting changes in mix, partially offset by some
transition of volumes to the LXD and the disposal of PatBase.
PEOPLE & CULTURE
We are committed to making RWS a great place to work and we are proud to have
built an inclusive environment where everyone has the opportunity, and support
around them, to be their best.
We aim to ensure that everyone understands the Group's overriding priorities -
growth, efficient delivery and engagement - through a regular cadence of
communications. This includes CEO-led messages, our monthly newsletter,
updates on transformation programmes and regular town hall events across
divisions and functions, as well as on a Group-wide basis.
Now in its fourth year, our annual RWS Engagement Survey explores colleagues'
attitudes and experiences towards RWS - what's working well and what can be
improved with regards to collaboration, engagement, inclusion, growth and
development, leadership and living the Group's values. This year's survey
achieved another strong response rate of 81% (FY23: 84%) and a 61% (FY23: 61%)
favourable engagement score. We were pleased to note that there is strong
flexibility, trust and respect between colleagues and that managers are seen
as effective in removing barriers and engendering caring and trusting
relationships with their teams. In addition, we saw an improvement in the
belief amongst colleagues that their voice matters and that there will be
positive change as a result of the insights that the survey offers.
Over the year we have continued to address the feedback from our 2023
colleague engagement survey, with action plans in place across four global
workstreams and at divisional and functional levels to focus and drive
improvements. In support of one of the global workstreams we held 67 'One RWS'
events in 43 locations in the last week of April, supplemented by a number of
virtual events for those colleagues who are fully remote.
It was an opportunity for colleagues to be recognised for their contribution,
to better connect them to strategy, group priorities and one another, to learn
more about our portfolio of products and solutions, particularly how critical
AI is to our future, and to focus on our community and culture. These events
were well received and we anticipate them becoming annual events in our
calendar.
I am also pleased to report an improvement to our voluntary colleague
attrition levels which have fallen to 10.6% (FY23: 11.9%). Combined with an
improvement in the 'intent-to-stay' measurement in the 2024 engagement survey
to 67% (FY23: 64%), we believe that we are building the kind of organisation
where colleagues feel that they can develop their careers.
We were also pleased to continue our Ambassador Awards - a recognition
programme that encourages all colleagues to nominate a fellow colleague or
team. Now in its second year, all colleagues (across each division, the LXD
and our Group functions) nominate one colleague or team that exemplifies each
of our four values. These 24 semi-annual winners are given a financial reward
and their stories are shared and promoted internally to acknowledge their
outstanding contributions. This programme has been highly popular, attracting
over 800 entries throughout the year.
Our eLearning platform, MyLX, continues to be the bedrock of our learning and
development. Colleagues have access to more than 360,000 training courses from
Skillsoft. A majority of our colleagues use MyLX on an ongoing basis and have
completed over 150,000 various learning assets during FY24. The platform,
which we have contractually renewed this year, has also enabled us to roll out
important business-wide learning initiatives, including our compliance and
quality training, professional and technical skill development, and DEI and
wellbeing sessions.
Three significant appointments were made during the year to further strengthen
our Executive Team and focus on delivering against our medium-term strategy.
In December 2023, Amanda Newton was appointed President of Global Content
Services, bringing together RWS's linguistic, intellectual property and
cultural expertise - alongside our AI-enabled technologies - to support
clients on their globalisation journey. We also appointed Vasagi Kothandapani
in January 2024 as President of Enterprise Services, taking a leading position
in how RWS partners with its clients to ensure that AI becomes the driving
force behind their future success. In September 2024 Mark Lawyer, previously
General Manager of Linguistic AI, was appointed President of Regulated
Industries & Linguistic AI. Mark's appointment reinforces RWS's focus on
delivering AI technology to financial, legal and life sciences clients. Thomas
Labarthe continues to lead RWS's content technology portfolio.
SUSTAINaBILITY AND ESG
Environmental, social and governance ("ESG") matters continue to be core to
the way RWS operates. Clients, partners and colleagues are keen to understand
the steps we are taking to become a more sustainable business.
On environmental matters, the Group formally submitted its greenhouse gas
("GHG") emissions reduction targets to the Science Based Targets initiative
("SBTi") for validation in December 2023. We were delighted to receive
confirmation from the SBTi that the targets had been validated. We have
committed to reduce absolute Scope 1 and 2 GHG emissions by 54.6% by the end
of the financial year ending 30 September 2033 (FY33) from a FY22 base year.
The Group has also committed to reduce Scope 3 GHG emissions from purchased
goods and services and colleague commuting by 61.1% per million GBP value
added within the same time frame.
In recognition of our ESG progress, in December 2023 we were awarded a Silver
Medal by EcoVadis for the second year running. Once again we ranked in the top
quartile of participating companies and in the top 10% of companies in our
industry category, improving our score to 66% (FY22: 63%).
The RWS Campus, a global programme nurturing localisation talent, continues to
partner with around 600 universities worldwide, fostering strong relationships
to develop the next generation of professionals who will positively impact our
industry. One of these relationships is with the University of Manchester,
where The RWS Foundation provides funding via the RWS-Brode scholarship and,
during the last year, several professional development workshops were
delivered to students.
Earlier in the year our Trados team - funded by The RWS Foundation - embarked
on a profound learning journey, exploring ways in which to make Trados more
accessible for the visually impaired. Working with a blind language
specialist, a dedicated team has worked to improve the tool - ensuring that it
is accessible to those with visual impairments. The latest improvements
include enhanced screen reader compatibility, improved keyboard navigation and
accessible project list and workflow navigation.
In February 2024 RWS joined Meta's Open Loop to help bridge the gap between
rapid advances in AI innovation and policy-making. Open Loop is a global
programme involving a consortium of technology businesses, academics and civil
society representatives that connects policymakers and technology companies to
help develop effective and evidence-based policies around AI and specifically
generative AI systems. As an extensive developer and user of AI, RWS believes
that it is critical that proposed AI regulations strike the right balance
between fostering innovation and ensuring that AI is developed safely and
securely for the benefit of customers and broader society.
CURRENT TRADING AND OUTLOOK
The Group's FY24 results reflect good progress in a number of key areas and
demonstrate that we are well positioned for clients' increased appetite to
harness AI to meet their language and content needs. Our successes with
TrainAI, Language Weaver and Evolve demonstrate that our AI-enabled solutions
are resonating with clients at this transitional moment for our industry.
Given our rich history and deep experience in developing AI and technology, we
are confident that we are well positioned to support clients throughout their
AI journey, developing the tools and solutions required to help them engage
with their customers and users on a global scale.
It is clear that our investments in growth, AI and transformation are allowing
us to successfully pivot away from an overreliance on traditional localisation
revenues and underpin future revenue and margin development, alongside ongoing
effective cost management.
In May 2024 I announced my intention to step down as Chief Executive Officer
and Director of the Company. Since the start of December I have been handing
over my responsibilities to my successor, Benjamin Faes, and I will remain
available to him until the end of January 2025, when I will leave the Company.
It has been my privilege to lead our talented and diverse global team and to
serve our wonderful clients over the past three and half years.
Ian El-Mokadem | Chief Executive Officer
11 December 2024
Chief Financial Officer's Review
The Group maintains a robust balance sheet, ensuring our capacity to invest in
long-term competitiveness and deliver sustained value to our shareholders. Our
continued investment in growth initiatives and ongoing efficiency efforts have
resulted in a more resilient performance in FY24, with a return to growth in
the second half. We further strengthened our balance sheet by disposing of our
interest in PatBase, have successfully integrated our recent acquisitions
(Propylon and ST Comms), and have completed our first share repurchase
programme. We continue to make good progress on the Group's transformation
programme.
During 2024 total revenue declined by 2%, adjusted operating profit by 9%, and
adjusted profit before tax by 11%. Whilst the Group experienced continued
pressure from reduced client budgets and longer decision-making cycles in some
parts of the business this year, we were pleased that the Group returned to
growth in the second half. Gross margin expansion of 60bps to 46.9% for FY24
was driven by efficiencies from LXD, group restructuring and broader cost
control efforts. Cost of inflation in overheads was also offset by
restructuring and broader cost control efforts, whilst incremental levels of
investment were made to support the growth initiatives and ongoing
transformation. Gains from hedging were £5m in FY24 compared to £13m in
FY23. The Group continued to enhance its portfolio with the successful
integration of Propylon, the acquisition and integration of ST Communications
and the disposal of its interest in PatBase.
The Group continues to be highly cash generative, with cash generated from
operations of £94.5m, notwithstanding acquisitions and costs associated with
restructuring and integration. Net cash (excluding lease liabilities) declined
in the period from £23.6m to net debt (excluding lease liabilities) of
£12.9m reflecting £25m proceeds from the disposal of PatBase, capital
expenditure of £43.1m, dividend payments of £45.5m and a further £30.4m
paid for the share repurchase programme.
REVENUE
Overall, in FY24 the Group generated revenues of £718.2m, which is 2% lower
than FY23. The second half reported revenue was in line with prior year due to
an improved performance across all divisions which is reflected in a second
half OCC revenue growth of +2%. For the full year OCC revenue growth was flat
compared to FY23.
In divisional terms, Language Services recorded £327.1m in revenue, a 1%
decrease in total revenue and a 3% improvement 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 continued
challenging conditions. The TrainAI growth initiative performed well and
provides good momentum going forwards. Regulated Industries recorded £146.5m
in revenue, a decrease of 10%, although a decline of 7% on an OCC basis
year-on-year. Positive progress continues to be made with Linguistic
Validation and while some Life Sciences clients continued to deliver reduced
levels of activity, we anticipate volumes to recover as more products move
through regulatory and launch phases in due course. Language and Content
Technology had total revenue of £142.3m, an increase of 4% year on year and a
decline of 1% on an OCC basis. Language Weaver and Propylon performed well
supporting a more challenged performance elsewhere in the division. IP
Services recorded £102.3m in revenue, a decrease of 2% on prior year and an
increase of 3% on an OCC basis. The growth was driven by a strong performance
in the Eurofile segment with many patent filers remaining committed to the
existing arrangement over the Unitary Patent.
The majority of the Group revenue, categorised by geography, is in the US
market, which accounts for 53% of the total. No one client accounts for more
than 10% of Group revenue.
GROSS PROFIT
Gross profit decreased by 1% to £336.5m, delivering a gross margin of 46.9%,
up 60bps from 46.3% in the prior year. Cost of inflation and foreign exchange
headwinds were more than offset by efficiencies from LXD, group restructuring
and broader cost control efforts. We continue to identify further
opportunities for efficiency gains through our transformation programmes and
LXD platform and the use of AI internally.
ADMINISTRATIVE EXPENSES
Administrative expenses have decreased to £270.7m (FY23: £346.4m).
Administrative expenses as a percentage of revenue have decreased from 47% to
38%, which reflects the lower exceptional items and impairment charges within
adjusting items. Adjusted administrative expenses (gross profit less adjusted
operating profit) increased by £8.5m to £224.2m, with cost control measures
not quite offsetting cost of inflation, the additional overheads costs
associated with Propylon, incremental investments in growth initiatives and
reduced foreign exchange gains.
Amortisation of acquired intangibles was £40.8m (FY23: £38.8m). This
included additional amortisation for Propylon intangible assets, partially
offset by the impact of exchange rate movements during the period.
Amortisation of non-acquired intangibles was £14.0m (FY23: £18.1m).
The Group recorded a £10.5m impairment charge on its revalued freehold
building at 1-3 Chalfont St Peter after a recent revaluation lowered its value
from £14.0m to £3.5m. The revaluation took place as part of a Group property
portfolio review. Furthermore, an impairment charge of £11.7m was recognised
on IT investments after a change in strategy resulted in the impairment of a
previous solution that was in development.
Exceptional costs of £3.4m were incurred during the year, relating to Group
restructuring, integration and the disposal of PatBase.
Acquisition costs of £7.2m were primarily related to the contingent
consideration and purchase of ST Communications during the period and
contingent consideration for the purchase of Propylon Holdings Limited in the
prior period.
FINANCE COSTS
Net finance costs were £5.8m (FY23: £4.0m), with the year on year increase
due primarily to an increase of £2.2m 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 6 August 2027, after
triggering the option to extend maturity by one year. With only $100m drawn as
at 30 September 2024, we have 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 profit before tax of £60.0m (FY23: loss of £10.9m), the
increase being driven by lower impairment charges and lower exceptional
charges primarily related to group restructuring as well as the profit on sale
of PatBase of £30.0m.
ADJUSTED PROFIT BEFORE TAX
Adjusted profit before tax ("Adjusted PBT") is stated before amortisation of
acquired intangibles, impairments of other assets considered material and one
off in nature, acquisition costs, share-based payment expense 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 £106.7m (Adjusted PBT margin: 14.9%) recorded in the period has
decreased from £120.1m (Adjusted PBT margin: 16.4%) in the prior year. Strong
cost control measures and restructuring efforts were implemented to counteract
inflation and ongoing investments in growth and transformation. However,
weaker business performance and foreign exchange headwinds led to the release
of management bonuses and a slightly lower adjusted PBT compared to the
previous year. Excluding the impact of foreign exchange, both the adjusted PBT
and margin are in line with the prior year.
TAX CHARGE
The Group's tax charge for the year was £12.5m (FY23: £16.8m). The adjusted
tax charge for the period was £26.6m (FY23: £29.6m) representing an
effective adjusted tax rate of 24.9% compared with 24.6% in the prior
financial year. The rise in the effective rate largely reflects the full year
impact of the increase in the UK rate change to 25%, from the blended rate of
22% in the prior year.
EARNINGS PER SHARE AND DIVIDEND
Basic earnings per share for the financial year increased from (7.1)p to
12.8p, while adjusted basic earnings per share decreased from 23.3p to 21.6p,
representing a decrease of 7%, which reflects the drop in adjusted profit
before tax. The weighted average number of ordinary shares in issue for basic
and adjusted basic earnings decreased from 388.2m to 371.3m, 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 2024 of 10.0 pence
per share has been proposed, equivalent to £36.9m, while an interim dividend
of 2.45 pence per share, equivalent to £9.1m, was paid during the financial
period. A final dividend for the year ended 30 September 2023 of 9.8p pence
per share, equivalent to £45.5m, was paid in this financial period.
The proposed total dividend for the year of 12.45 pence per share represents a
2% increase on the total dividend relative to the prior financial period of
12.2 pence per share.
BALANCE SHEET
Net assets at 30 September 2024 decreased by £87.7m to £899.6m. The main
drivers of this decrease was the decreasing foreign currency denominated net
assets, mainly due to the weakening US Dollar.
Current assets at 30 September 2024 of £278.3m have decreased by £11.9m on
the prior year. This includes a decrease in trade and other receivables of
£1.1m and cash and cash equivalents balances of £14.7m to £61.5m.
Current liabilities have also decreased to £158.4m at 30 September 2024, a
decrease of £24.2m, primarily due to a decrease in trade and other payables
balances of £22.1m. Non-current liabilities have increased by £2.6m,
reflecting a net increase in loan balances under our RCF of £21.8m, partly
offset by a decrease in lease liabilities of £4.9m, trade and other payables
of £1.9m and deferred tax of £4.2m.
CASH FLOW and working capital
Cash generated from operations was £95.5m, £33.7m less than the prior year,
when cash generated was £129.2m. Operating cash flow before movements in
working capital and provisions was £128.6m decreased from £130.9m in the
prior year. The key items within the net working capital outflow of £32.2m
relate to the restructuring of the Group, revenue related phasing, supply
chain management and other procurement activities.
Significant cash outflows from investing activities included purchases of
intangible software of £40.5m and property plant and equipment of £2.6m
partially offset by the £25.0m receipt for the disposal of PatBase.
The Group completed its share repurchase programme during the period with
£19.4m of shares repurchased in FY23 and the remaining £30.4m repurchased in
FY24. Cash flows from other financing activities included dividends paid
within the financial year ended 30 September 2024 of £45.5m.
Cash balances at the financial year end amounted to £61.5m, with external
borrowings of £74.4m, excluding lease liabilities, resulting in a net debt
position of £12.9m (FY23: £76.2m cash and external borrowings of £52.6m,
resulting in net cash of £23.6m). Net debt including lease liabilities was
£40.1m (FY23: net debt of £9.9m).
POST BALANCE SHEET EVENTS
There are no significant post balance sheet events.
Candida Davies | Chief Financial Officer
11 December 2024
Consolidated Statement of Comprehensive Income
for the year ended 30 September 2024
Note 2024 2023
£m £m
Revenue 3 718.2 733.8
Cost of sales (381.7) (394.3)
Gross profit 336.5 339.5
Administrative expenses (270.7) (346.4)
Operating profit/(loss) 65.8 (6.9)
Analysed as:
Adjusted operating profit: 112.3 123.8
Amortisation of acquired intangibles 10 (40.8) (38.8)
Impairment of intangible assets 9, 10 (11.7) (62.4)
Impairment of property, plant and equipment (10.5) -
Acquisition costs 5 (7.2) (5.1)
Share-based payment expense (2.9) (1.8)
Profit on disposal of business 5 30.0 -
Exceptional items 5 (3.4) (22.6)
Operating profit/(loss) 65.8 (6.9)
Finance income 0.9 0.6
Amortisation of capitalised exceptional finance costs (0.2) (0.3)
Finance costs (6.5) (4.3)
Profit /(loss) before tax 60.0 (10.9)
Taxation 6 (12.5) (16.8)
Profit/(loss) for the year attributable to the owners of the Parent 47.5 (27.7)
Other comprehensive (expense)/ income
Items that may be reclassified to profit or loss:
Gain /(loss) on retranslation of quasi equity loans (net of deferred tax) 1.7 (1.9)
Loss on retranslation of foreign operations (64.1) (60.3)
Gain on hedging (net of deferred tax) 0.4 2.0
Total other comprehensive expense (62.0) (60.2)
Total comprehensive expense attributable to owners of the Parent (14.5) (87.9)
Basic earnings per ordinary share (pence per share) 8 12.8 (7.1)
Diluted earnings per ordinary share (pence per share) 8 12.8 (7.1)
Consolidated Statement of Financial Position
as at 30 September 2024
Note 2023
2024 £m
£m
Non-current assets
Goodwill 9 570.8 608.6
Intangible assets 10 317.0 359.4
Property, plant and equipment 13.5 27.5
Right-of-use assets 22.7 27.5
Non-current income tax receivable 2.2 1.4
Deferred tax assets 6 2.0 1.2
928.2 1,025.6
Current assets
Trade and other receivables 211.2 212.3
Income tax receivable 5.6 1.7
Cash and cash equivalents 12 61.5 76.2
278.3 290.2
Total assets 1,206.5 1,315.8
Current liabilities
Trade and other payables 127.7 149.8
Lease liabilities 8.5 9.9
Income tax payable 14.3 15.3
Provisions 7.9 7.6
158.4 182.6
Non-current liabilities
Loans 11 74.4 52.6
Lease liabilities 18.7 23.6
Trade and other payables 0.4 2.3
Provisions 1.5 9.7
Deferred tax liabilities 6 53.5 57.7
148.5 145.9
Total liabilities 306.9 328.5
Total net assets 899.6 987.3
Capital and reserves attributable to owners of the Parent
Share capital 3.7 3.8
Share premium 54.5 54.5
Share based payment reserve 8.1 5.3
Reverse acquisition reserve (8.5) (8.5)
Other reserve 0.1 -
Merger reserve 624.4 624.4
Foreign currency reserve (31.8) 33.7
Hedge reserve - (3.5)
Retained earnings 249.1 277.6
Total equity 899.6 987.3
Consolidated Statement of Changes in Equity
for the year ended 30 September 2024
Note Share Share Other reserves (see below) £m
capital
£m premium Retained earnings Total attributable
account £m to owners
£m of Parent
£m
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 unexercised 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
Profit for the year - - - 47.5 47.5
Gain on hedging - - 0.4 - 0.4
Gain on retranslation of quasi equity loans - - 1.7 - 1.7
Loss on retranslation of foreign operations - - (64.1) - (64.1)
Total comprehensive (expense)/ income for the year - - (62.0) 47.5 (14.5)
Deferred tax on unexercised share options 6 - - - (0.1) (0.1)
Dividends 7 - - - (45.5) (45.5)
Purchase of own shares (0.1) - 0.1 (30.4) (30.4)
Equity-settled share-based payments charge - - 2.9 - 2.9
Deferred tax on share-based payments - - (0.1) - (0.1)
At 30 September 2024 3.7 54.5 592.3 249.1 899.6
Other reserves Other reserve Reverse acquisition reserve Merger Foreign currency reserve Total
Share-based £m £m reserve £m Hedge reserve other
payment £m £m reserves
reserve £m
£m
At 30 September 2023 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
Other comprehensive (expense)/income for the year - - - - (62.4) 0.4 (62.0)
Fair value losses on net investment hedge taken to currency reserve - - - - (3.1) 3.1 -
Equity-settled share-based payments charge 2.9 - - - - - 2.9
Purchase of own shares - 0.1 - - - - 0.1
Deferred tax on share-based payments (0.1) - - - - (0.1)
At 30 September 2024 8.1 0.1 (8.5) 624.4 (31.8) - 592.3
Consolidated Statement of Cash Flows
for the year ended 30 September 2024
Note 2023
2024 £m
£m
Cash flows from operating activities
Profit / (loss) before tax 60.0 (10.9)
Adjustments for:
Depreciation of property, plant and equipment 6.3 7.3
Amortisation of intangible assets 10 54.8 56.9
Impairment of Intangible assets 9,10 11.7 62.4
Impairment of property, plant and equipment 10.5 -
Depreciation of right-of-use assets 8.2 9.4
Share-based payment expense 2.9 1.8
Profit on disposal of business 5 (30.0) -
Lease modification (1.6) -
Net finance costs 5.8 4.0
Operating cash flow before movements in working capital 128.6 130.9
Increase in trade and other receivables (6.8) (2.3)
(Decrease) / Increase in trade and other payables and provisions (26.3) 0.6
Cash generated from operations 95.5 129.2
Income tax paid (20.2) (21.7)
Net cash inflow from operating activities 75.3 107.5
Cash flows from investing activities
Interest received 0.9 0.6
Disposal proceeds 5 25.0 -
Acquisition of subsidiary, net of cash acquired 13 (0.5) (31.5)
Purchases of property, plant and equipment (2.6) (3.8)
Purchases of intangibles (software) 10 (40.5) (36.5)
Net cash outflows from investing activities (17.7) (71.2)
Cash flows from financing activities
Proceeds from borrowings 87.0 49.0
Repayment of borrowings (64.1) (25.0)
Interest paid (4.6) (2.6)
Lease liability payments (including interest charged of £1.1m (2023: £1.1m)) (9.5) (11.9)
Proceeds from the issue of share capital - 0.1
Purchase of own shares (30.4) (19.4)
Dividends paid 7 (45.5) (46.3)
Net cash outflow from financing activities (67.1) (56.1)
Net decrease in cash and cash equivalents (9.5) (19.8)
Cash and cash equivalents at beginning of the year 76.2 101.2
Exchange losses on cash and cash equivalents (5.2) (5.2)
Cash and cash equivalents at end of the year 12 61.5 76.2
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 2024, which were approved by the
Board of Directors on 11 December 2024.
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 2024. Statutory
accounts for 2023 have been delivered to the registrar of companies, and those
for 2024 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
The financial statements have been prepared on a going concern basis, as
outlined in the Directors' report. The Directors have conducted an assessment
of the Group's ability to continue as a going concern for a period of at least
twelve months from the date of approval of the accounts.
In making this assessment, the Directors considered the Group's current
financial position, as well as forecasted earnings and cash flows for the
18-month period ending 31 March 2026. The business plan supporting this
evaluation is based on the Board-approved budget.
The Directors' assessment also considered the Group's existing debt levels,
committed funding, liquidity position under its debt covenants, and its
ongoing ability to generate cash through trading activities. As of 30
September 2024, the Group had net debt of £40.0m (2023: £9.9m), which
includes the Group's US$220m revolving credit facility ("RCF") of which
£74.4m was drawn at year end (2023: £52.6m), lease liabilities of £27.2m
(2023: £33.5m), offset by cash and cash equivalents of £61.5m (2023:
£76.2m). The RCF matures in August 2027, after the one-year extension option
was triggered and approved by lenders in the period. At year-end, the Group's
net leverage ratio, as defined by the RCF agreement, was 0.3 EBITDA (2023:
-0.1), while the interest coverage ratio was 23.7 EBITDA (2023: 39.9), both of
which are well within the limits set by the Group's RCF agreement.
In view of the Group's principal risks and uncertainties, the Directors have
applied appropriate sensitivities in their going concern assessment. They
modelled a range of downside scenarios, including a 20% reduction in the
Group's revenues and corresponding cash flows, with management mitigating
these impacts by only reducing the Group's directly attributable controllable
costs of sale. No significant structural changes to the Group were assumed in
these scenarios, and all mitigating actions were within management's
control.
In each downside scenario, the Group maintained headroom with respect to both
covenants and liquidity through to 31 March 2026. As a result, 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 continue to meet their liabilities as they fall due during the
period ending 31 March 2026 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 financial statements in accordance with generally accepted
accounting principles requires management to make certain judgments,
estimates, and assumptions that affect the reported amounts of assets,
liabilities, income, and expenses. These judgments and estimates are evaluated
on a regular basis and reflect management's best estimates, drawing from
historical experience and other relevant factors, including reasonable
expectations of future events. Revisions to estimates are recognized
prospectively. However, actual results may differ from these estimates due to
unforeseen events or actions, and such differences could be material.
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
Due to the complexity of multi-element contracts which often include the
provision of products and services, management judgment is required to
determine the appropriate revenue recognition. Management assesses whether the
contract should be accounted for as a single performance obligation or as
multiple performance obligations.
Judgment is applied in establishing the criteria for determining when revenue
related to multiple elements should be recognized and in determining the
stand-alone selling price of each element. The Group typically determines the
stand-alone selling prices of elements based on prices that are not directly
observable, relying on stand-alone list prices which are then subject to
discounts. These prices are reviewed annually and adjusted as necessary. This
process is undertaken alongside a fair value assessment of the stand-alone
selling prices to ensure the reasonableness of the transaction price
allocation. Further details regarding the determination of stand-alone selling
prices for the purpose of allocating the transaction price in multi-element
arrangements can be found 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
£60.0m (2023: £61.1m).
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 £14.0m (2023: £19.3m) (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 assumptions.
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 estimates the total costs to be incurred on a contract-by-contract
basis, and these estimates are reviewed on an ongoing basis to ensure that the
revenue recognised accurately reflects the proportion of work completed as of
the balance sheet date. All contracts are of a short-term nature, with the
majority of services being invoiced upon completion. As at the year end, the
value of work in progress amounted to £56.0m (2023: £52.7m). Changes in the
estimated total costs of contracts could, in aggregate, have a material impact
on the carrying amount of accrued income at the balance sheet date.
Impairment of goodwill and intangible assets
An impairment test of goodwill and other intangible assets, requires
estimation of the value in use ('VIU') of the cash generating units ('CGUs')
to which goodwill and other intangible assets have been allocated. The VIU
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 a 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. See Note 9 and 10 for further
details.
Key assumptions used by management in estimating VIU are
Discount rates - Pre tax discount rates which are based on the Weighted
Average Cost of Capital (WACC) of a typical market participant and reflect
market volatility in risk free rate and equity risk premium inputs . The
discount rates have increased reflecting market volatility in risk free rate
and equity risk premium inputs. See Note 9 for details
Forecast cash flows - based on assumptions from the approved budget and 3-year
plan which incorporate Management's best estimates of future cash flows and
take into account future growth and price increases, have proved to be
reliable guides in the past and the Directors believe the estimates are
appropriate. See Note 9 for details of long term growth rates used outside
of the plan period
Terminal growth rates - of 2.0% (2023: 2.0%) was used for cash flows outside
the plan projections. This rate is conservative and is considered to be lower
than the long-term historic growth rates in the underlying territories in
which the CGUs operate and the long-term growth rate prospects of the sectors
in which the CGUs operate.
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 the 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 £6.4m
(2023: £6.7m), see Note 6.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Accounting policy
Revenue represents transaction prices to which the Group expects to be
entitled in return for delivering goods or services to its customers. The
Group applies the five-step model in IFRS 15 Revenue from Contracts with
Customers ("IFRS 15"). Prescriptive guidance in IFRS 15 is followed to deal
with specific scenarios requiring management judgement. The approach taken to
evaluate revenue recognition is consistent across all divisions, although each
contract is considered on a case-by-case basis.
Group contracts have single or multi-elements performance obligations.
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. Some contracts include performance obligations in respect
of the licences, support and maintenance, hosting services and professional
services. Software licences are either perpetual, term or software as a
service (SaaS) in nature.
Contract revenue is billed in advance and revenue is deferred where the
performance obligation is satisfied over time. The Group's revenue contracts
do not include any material future vendor commitments and thus no allowances
for future costs are made.
The following provides information about the nature and timing of the
satisfaction of performance obligations in contracts and the related revenue
recognition policies, categorised by reporting segments:
1) Language and Content Technology Division
Identification of performance obligations
The Group's Language and Content Technology contracts typically include
multi-elements performance obligations in respect of licences, support and
maintenance, hosting services and professional services. Identification of the
performance obligations in such arrangements involves judgement, more details
of the nature and impact of the judgement are included in Note 2.
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.
Determining transaction prices
At the inception of a contract, a transaction price is agreed, being the
amount, the Group expects to be entitled over the expected duration of the
contract. Such expected amounts are only included to the extent that it is
highly probable no revenue reversal will occur.
Allocation of transaction prices to performance obligations
The service contracts typically consist of multiple components and typically
have more than one obligation, each with its own contract duration as adjudged
by management. Management applies judgement to allocate the consideration
specified in the contract with the customer to each performance obligation
based on the stand-alone selling price. See below for details.
Revenue recognition
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.
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.
Perpetual and term licences software licences have 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 have material ongoing performance obligations associated with
them. 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.
A support and maintenance contracts have 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 contract revenue 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 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.
2) IP Services
Identification of performance obligations
The Group's Patent Filing Contracts have one performance obligation, which is
to deliver patent filing or translation services.
Determining transaction prices
The transaction price is based on the value of services rendered.
Allocation of transaction prices to performance obligations
Transaction price is assigned to a single performance obligation.
Revenue recognition
Revenue is recognised at a point in time for patent filing services and over
time for language translation services.
3) Language Services
Identification of performance obligations
The contracts provide for the Group to be reimbursed for translation services.
Determining transaction
prices
The transaction price is the consideration specified in the contract.
Allocation of transaction prices to performance obligations
Each contract has a single performance obligation and so the whole contract
price is assigned to that single obligation.
Revenue recognition
The Group recognises revenue over time and measures the completeness of this
performance obligation using input method (cost incurred to date as a
proportion of total costs).
4) Regulated Industries
Identification of performance obligations
Regulated Industries services contracts provide for the Group to be reimbursed
for specialist translation services provided.
Determining transaction prices
The transaction price is as stipulated in the contract.
Allocation of transaction prices to performance obligations
Contract price is allocated to the sole performance obligation in the
contract.
Revenue recognition
The Group recognises revenue over time and 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.
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 customers 2024
£m 2023
£m
At a point in time 22.4 25.8
Over time 119.9 110.9
Language and Content Technology 142.3 136.7
At a point in time 30.7 22.4
Over time 71.6 82.4
IP Services 102.3 104.8
Over time 327.1 329.8
Language Services 327.1 329.8
Over time 146.5 162.5
Regulated Industries 146.5 162.5
Total revenue from contracts with customers 718.2 733.8
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 £1.5m (2023: £1.7m).
Capitalised contract costs are recognised within other debtors on the
statement of financial position.
Receivables, contract assets and contract liabilities with customers Notes 2024 2023
£m £m
Net trade receivables 125.9 138.6
Net contract assets (accrued income) 56.0 52.7
Contract liabilities (deferred income) (41.6) (49.9)
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 £56.0m (2023:
£52.7m). 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 2023 was £47.6m (2023: £49.5m).
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 assesses 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 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.
· 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 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.
Unallocated costs reflect corporate overheads and other expenses not directly
attributed to segments.
Segment results for the year ended L&CT IP Services Language Services Regulated Industries Group
30 September 2024
£m
£m £m £m Unallocated Costs £m
£m
Revenue from contracts with customers 142.3 102.3 327.1 146.5 - 718.2
Operating profit/(loss) before charging: 34.2 26.9 39.6 19.8 (8.2) 112.3
Amortisation of acquired intangibles (14.9) - (14.0) (11.9) - (40.8)
Impairment losses - (22.2) - - - (22.2)
Acquisition costs - - - - (7.2) (7.2)
Profit on disposal of business - 30.0 - - - 30.0
Exceptional items (see Note 5) (0.3) (0.9) 1.0 (1.6) (1.6) (3.4)
Share based payment expense (0.5) (0.5) (1.2) (0.4) (0.3) (2.9)
Profit from operations 18.5 33.3 25.4 5.9 (17.3) 65.8
Net finance expense (5.8)
Profit before taxation 60.0
Taxation (12.5)
Profit for the year 47.5
Segment results for the year ended L&CT IP Services Language Services Regulated Industries Group
30 September 2023
£m
£m £m £m Unallocated Costs £m
£m
Revenue from contracts with customers 136.7 104.8 329.8 162.5 - 733.8
Operating profit/(loss) before charging: 37.0 27.7 39.4 22.9 (3.2) 123.8
Amortisation of acquired intangibles (12.0) (0.1) (14.4) (12.3) - (38.8)
Impairment Losses) (62.4) - - - - (62.4)
Acquisition costs - - - - (5.1) (5.1)
Exceptional items (see Note 5) (3.3) (6.0) (5.7) (1.3) (6.3) (22.6)
Share based payment expense (0.2) - (0.5) (0.2) (0.9) (1.8)
(Loss)/ profit from operations (40.9) 21.6 18.8 9.1 (15.5) (6.9)
Net finance expense (4.0)
Loss before taxation (10.9)
Taxation (16.8)
Loss for the year (27.7)
The table below shows revenue by the geographic market in which clients are
located.
Revenue by client location 2023
2024 £m
£m
UK 75.4 81.7
Continental Europe 171.0 167.8
United States of America 382.8 393.2
Rest of the World 89.0 91.1
Total 718.2 733.8
The Group does not place reliance on any specific customer and had no
individual customers that generated 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 2024 2023
£m
£m
UK 184.8 191.8
Continental Europe 146.7 156.6
United States of America 315.3 334.6
Rest of the World 71.4 50.8
Total 718.2 733.8
The table below presents the Group's operating assets by geographical
location. Goodwill and acquired intangible assets are excluded, as they
support all four divisions across all countries where the Group operates (see
Note 9 and 10 for further details on goodwill and intangible assets).
Operating assets by geography 2024 2023
£m £m
UK 209.8 190.2
Continental Europe 64.3 80.8
United States of America 115.3 128.1
Rest of the World 47.9 59.1
Total 437.3 458.2
Goodwill 570.8 608.6
Acquired intangible assets 198.4 249.0
Current liabilities (158.4) (182.6)
Non-current liabilities (148.5) (145.9)
Net assets 899.6 987.3
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 results* 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.
2024 2024 2023 2023 2023
2024 Tax impact Total Pre-tax Tax impact Total
Pre-tax £m £m £m £m £m
£m
Group transformation programme (1.4) 0.3 (1.1) (5.5) 1.1 (4.4)
Restructuring & integration related costs (2.2) 0.6 (1.6) (12.3) 2.9 (9.4)
Legacy payment arrangements 1.7 - 1.7 (4.8) - (4.8)
Total exceptional items - operating (1.9) 0.9 (1.0) (22.6) 4.0 (18.6)
Amortisation of exceptional finance (0.2) - (0.2) (0.3) - (0.3)
Disposal costs (1.3) - (1.3) - - -
Total exceptional items - excluding profit on disposal of business (3.4) 0.9 (2.5) (22.9) 4.0 (18.9)
Profit on disposal of business 30.0 - 30.0 - - -
Total exceptional items 26.6 0.9 27.5 (22.9) 4.0 (18.9)
Total exceptional items - financing and profit on disposal 28.5 - 28.5 (0.3) - (0.3)
*Underlying results are performance measures that exclude one-off charges or
non-recurring events, offering a clearer reflection of the core financial
performance without the influence of unusual or extraordinary items.
A description of the principal items included is provided below:
Profit on disposal of business - During the year the Group disposed of its
interest in PatBase, a revenue and cost sharing arrangement venture for £30m.
£25m was paid on completion and £5m was received in November 2024.
Transformation costs - £1.4m 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. In total £2.6m has been paid in the period. The severance costs are
expected to be paid during the first half of FY25 and the ongoing benefits
from the integration will be recognised in the operating profit in the
Statement of Comprehensive Income.
Restructuring Costs - £1.4m was incurred in respect of severance and
termination payments related to the Group's cost reduction plans. A total of
£5.1m of these costs were paid during the period.
Integration costs - A £0.8m was incurred related to delivering synergies from
business.
Legacy payments - a £1.7m credit was recognised in the period in respect of
ongoing liabilities related to historic agreements with former owners of the
business and their respective families. This credit related to a reduction in
the liability after a final settlement was agreed. A further £0.6m was paid
during the period in respect of current year obligations.
Finance costs - £0.2m 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 £5.5m of Group transformation
costs, £12.3m of restructuring and integration related costs and £4.8m for
legacy payment arrangements. In total £22.6m was charged during the prior
period.
Acquisition-related costs
Acquisition-related costs totalled £7.2m (2023: £5.1m) and include a £0.3m
contingent payment linked to continued employment as part of the ST
Communications acquisition, contingent consideration of £5.6m (223: £1.2m)
in relation to the acquisition of Propylon and £1.2m (2023: £2.1m) in
relation to the acquisition of Fonto, both of which were acquired in prior
years.
These amounts are accounted for in compliance with IFRS 3 Business
Combinations and IAS 19 Employee Benefits.
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 that 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.
2023
2024 £m
£m
Current Tax Charge
UK corporation tax at 25% (2023: 22%) 1.9 4.8
Overseas current tax charge 17.4 17.7
Adjustment in respect of previous years (4.0) (2.4)
Deferred Tax Charge
Origination and reversal of temporary differences (7.5) (5.9)
Rate change impact 1.3 0.2
Adjustment in respect of previous years 3.4 2.4
Total tax expense in profit or loss 12.5 16.8
Total tax charge in equity 0.1 0.2
Total tax in other comprehensive income (0.2) (0.3)
Total tax charge for the year 12.4 16.7
Reconciliation of the Group's tax charge to the UK statutory rate: 2024 2023
£m £m
Profit / (loss) before taxation 60.0 (10.9)
Tax charge at UK corporation tax rate of 25% (2023 notional rate: 22%) 15.0 (2.4)
Effects of:
Expenses not deductible for tax purposes 2.7 3.1
Income treated as non taxable (7.5) -
Impact of impairment losses 1.9 13.7
Adjustments in respect of previous years (0.6) -
Rate change 1.3 0.2
Impact of overseas tax rates (0.3) 2.2
Tax charge as per the income statement 12.5 16.8
Effective tax rate 20.8% (154.1)%
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 lower than the UK's statutory tax rate due
to the impact of the non-taxable gain on the disposal of the PatBase business,
which was treated as tax exempt under the UK's substantial shareholding
exemption. The impact of this is offset, in part, by non 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, and a lower rate in the 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.
The current tax liability of £14.3m on the balance sheet comprises £7.7m of
UTPs, although it is not expected that these will be cash settled within 12
months of the year end date. Of the current tax assets of £5.6m, £1.3m
relates to uncertain tax provisions. The deferred tax liability of £53.5m is
net of deferred tax assets and liabilities arising on uncertain tax provisions
of £0.1m.
Pillar Two
On 20 June 2023 the UK enacted Pillar Two legislation which will seek to
impose a global minimum tax rate of 15%. The Group will be within the Pillar
Two rules for the period ended 30 September 2025.
The Group has adopted the amendments to IAS 12 which was amended in response
to the OECD's BEPS Pillar Two rules, which includes a mandatory temporary
exception to the recognition and disclosure of deferred taxes arising from the
jurisdictional implementation of the Pillar Two model rules. RWS has applied
the mandatory exception and is not recognising any deferred tax impact
The Group has sought to assess whether they would expect any Pillar Two top up
taxes to apply in future periods based on its current jurisdictional profile,
which concluded that the Republic of Ireland is the only jurisdiction that is
likely to be affected. The Republic of Ireland has enacted a minimum corporate
tax rate of 15% with effect from 1 January 2024, increasing the rate from its
current 12.5%. The future impact on the Group's effective tax rate for this
impact is expected to be negligible.
Deferred tax Share based payments Other temporary differences Acquired intangibles Tax losses
£m Accelerated capital allowances £m £m £m Total
£m £m
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)
Adjustments in respect of prior years - (0.6) (0.5) 0.6 (2.9) (3.4)
Acquisitions - - - (0.2) - (0.2)
Credited to income 0.5 0.7 (0.9) 7.3 (0.1) 7.5
Rate change - - (0.1) (1.2) - (1.3)
Charged to equity / OCI (0.1) - - - - (0.1)
Foreign exchange differences - - (0.5) 3.1 (0.1) 2.5
At 30 September 2024 0.9 (1.8) 8.0 (59.5) 0.9 (51.5)
Deferred tax assets and liabilities are presented on the balance sheet after
jurisdictional netting as follows:
2023
2024 £m
£m
Deferred tax assets 2.0 1.2
Deferred tax liabilities (53.5) (57.7)
Net deferred tax liability (51.5) (56.5)
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 £95.7m (2023:
£113.0m) available for offset against future profits. A deferred tax asset of
£0.9m (2023: £3.9m) has been recognised in respect of £4.5m (2023: £17.7m)
of such losses. The reduction in recognised losses is mainly due to the unwind
of deductions arising on corresponding adjustments that could be claimed on
settlement of uncertain tax positions, as well as a classification of
available deductions as a reduction to the current tax liability, as accounted
for under International Financial Reporting Interpretations Committee 23
('IFRIC 23').
No deferred tax asset has been recognised in respect of the remaining £91.2m
(2023: £95.3m) 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 £21.2m (2023: £21.9m).
Recognised deferred tax assets principally relate 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 £2.7m (2023: £4.2m).
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 £84.4m. Since the Group is
able to control the timing of reversal of these temporary differences, a
deferred tax liability of £0.9m has been recognised on the unremitted
earnings which the Group anticipate might give rise to a tax charge when
distributed. The Group has an estimated unrecognised deferred tax liability of
£3.8m of unremitted earnings where no distributions are expected to be paid
in the foreseeable future
7. DIVIDENDS 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
2024 £m
£m
Final ordinary dividend for the year ended 30 September 2023 was 9.8p (2022: 36.4 37.0
9.5p)
Interim ordinary dividend, paid 12 June 2024 was 2.45p (2023: 2.4p paid 21 9.1 9.3
July 2023)
45.5 46.3
The Directors recommend a final dividend in respect of the financial year
ended 30 September 2024 of 10.0 pence per ordinary share, to be paid on 14
February 2025 to shareholders who are on the register at 17 January 2025. This
dividend is not reflected in these financial statements as it does not
represent a liability at 30 September 2024. The final proposed dividend will
reduce shareholders' funds by an estimated £36.9m.
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:
2024 2023 2024 2023 2023
£m £m Basic earnings Basic earnings 2024 Diluted earnings
per share per share Diluted earnings per share
pence pence per share pence
pence
Profit /(loss) for the year 47.5 (27.7) 12.8 (7.1) 12.8 (7.1)
Adjustments:
Amortisation of acquired intangibles 40.8 38.8
Impairment losses 22.2 62.4
Acquisition costs 7.2 5.1
Share based payments expense 2.9 1.8
Net gain of debt modification 0.2 0.3
Exceptional items (26.6) 22.6
Tax effect of adjustments (14.1) (12.8)
Tax adjustments in respect of prior years - -
Adjusted earnings 80.1 90.5 21.6 23.3 21.6 23.3
2023
2024 Number
Number
Weighted average number of ordinary shares in issue for basic earnings 371,315,586 388,231,290
Dilutive impact of share options 490,640 30,688
Weighted average number of ordinary shares for diluted earnings 371,806,226 388,261,978
9. GOODWILL
Cost and net book value 2024 2023
£m £m
At 1 October 608.6 692.6
Additions (Note 13) 0.3 12.9
Impairment - (62.4)
Exchange adjustments (38.1) (34.5)
At 30 September 570.8 608.6
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 Long-term Discount rate Average Average
- 30 September 2024
growth rate
revenue growth
EBITDA margin
IP Services 2.0% 13.0% 4.6% 23.2%
Regulated Industries 2.0% 13.3% 2.0% 19.0%
Language Services 2.0% 13.3% 3.4% 17.5%
Language and Content Technology 2.0% 14.5% 6.7% 31.4%
Key assumptions for the value in use
- 30 September 2023
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%
The Group has four CGUs and in accordance with IAS 36, Management performed a
value in use impairment test at 30 September 2024. 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 assumptions
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 underpinning 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: 2024 2023
£m £m
IP Services 30.8 33.2
Regulated Industries 133.1 141.8
Language Services 208.1 223.9
Language and Content Technology 198.8 209.7
At 30 September 570.8 608.6
Goodwill assessment
The value-in-use calculations performed confirm that the recoverable goodwill
amount for all CGUs exceed their asset carrying value.
Additionally, the Group has considered other reasonable possible changes to
the assumptions underpinning the Language and Content Technology CGU
valuations that would need to occur and which would cause an impairment as
follows:
EBITDA margin: By assuming the actual FY24 EBITDA margin (29.8%) across the
projection period while keeping all other factors consistent with the base
model, we have noted an impairment of £20m at the mid range of the WACC which
is a reasonable possible change.
Revenue growth: adjusting revenue growth by 1% impacts the value in use by
approximately £14m which is a reasonable possible change.
Discount factor (WACC): There is evidence of reasonable possible change at the
higher end of WACC sensitivity (+100bps) which causes the headroom to be £0m.
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.
Trade Technology Non-compete Client Internally Total
names Clinician £m & trademarks relationships Software generated £m
software
£m & supplier £m & order books £m
£m
databases £m
£m
Cost
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
Additions - - 11.2 - - 0.1 29.2 40.5
Transfers - - - - - (11.2) 11.2 -
Acquisitions (Note 13) - - - - - - - -
Disposals - - - - - - (4.0) (4.0)
Currency translation (0.1) (0.6) (1.3) (0.2) (25.0) (0.7) 1.4 (26.5)
At 30 September 2024 1.0 6.4 168.4 2.1 326.6 3.4 73.9 581.8
Accumulated amortisation and impairment
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
Amortisation charge 0.2 0.6 22.6 - 25.8 0.3 5.3 54.8
Impairment - - - - - - 11.7 11.7
Disposals - - - - - - (4.0) (4.0)
Transfers - - - - - (7.4) 7.4 -
Currency translation - (0.4) (0.6) (0.2) (10.3) (0.5) 1.9 (10.1)
At 30 September 2024 0.3 5.1 84.8 2.1 141.7 3.0 27.8 264.8
Net book value
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
At 30 September 2024 0.7 1.3 83.6 - 184.9 0.4 46.1 317.0
Amortisation of acquired intangibles was £40.8m (2023: £38.8m) and
amortisation of other intangibles was £14.0m (2023: £18.1m). The £14.0m
amortisation of other intangibles includes £5.3m on internally developed
intangibles (2023: £3.9m). and £8.4m (2023: £12.2m) of technology which
related to the SDL business. The Group has identified intangible assets which
are individually material as follows:
SDL technology products acquired of £38.0.m (2023: £49.8m) with a remaining
useful life of 3 years
SDL's Helix platform of £7.9m (2023: £12.6m) with a remaining useful life of
3 years
SDL's customer relationships of £86.8m (2023:£104.3m) with a remaining
useful life of 7 years
Moravia's customer relationships of £72.3m (2023: £85.4m) with a remaining
useful life of 13 years and
Life Science's customer relationships of £5.3m (2023: £8.2m) with a
remaining useful life of 3 years.
No other classes of intangible asset hold individually material items. The
remaining average useful life is 9 years.
Following a review of historical transformation activities during the year, it
was concluded in that due to IP Services embarking on an alternative
solution to satisfy their need to streamline and modernise its customer
engagement processes, historical intangible assets which related to a previous
solution were now impaired. The Group has recognised £11.7m impairment in
the current year.
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.
Borrowings are derecognised from the Consolidated Financial Statements when
the contractual obligation is discharged, canceled, or expires. Any difference
between the carrying amount of the financial liability extinguished or
transferred to another party and the consideration paid, including any
non-cash assets transferred or liabilities assumed, is recognized in the
Consolidated Income Statement as either Other Income or Finance Expense.
If an existing financial liability is replaced with a new one from the same
lender under substantially different terms, or if the terms of an existing
liability are significantly modified, the transaction is treated as the
derecognition of the original liability and the recognition of a new
liability. The resulting difference in carrying amounts is recorded in the
Consolidated Income Statement.
2024 2023
£m £m
Due in more than one year
Loan 76.0 54.7
Issue costs (1.6) (2.1)
At 30 September 74.4 52.6
Analysis of net debt 30 September 2024 At 1 October Acquired Cash flows At 30 September
£m £m £m Non-cash £m
charges
£m
Cash and cash equivalents 76.2 - (9.5) (1.5) 61.5
Issue costs 2.1 - - (0.5) 1.6
Loans (current and non-current) (54.7) - (22.9) 1.6 (76.0)
Net debt excluding lease liabilities ("Net debt") 23.6 - (32.4) (4.1) (12.9)
Lease liabilities (33.5) - 9.5 (3.2) (27.2)
Net debt including lease liabilities (9.9) - (22.9) (7.3) (40.1)
Analysis of net debt 30 September 2023 At 1 October Acquired Cash flows At 30 September
£m £m £m Non-cash £m
charges
£m
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)
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.
On 3 August 2024, the Group exercised its option to extend the maturity of its
US$220m Revolving Credit Facility by one year, moving the loan's maturity date
from August 3, 2026, to August 6, 2027. The terms of the facility, including
the interest rate, remained unchanged. This extension did not qualify as a
significant loan modification under IFRS 9.
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
2024 £m
£m
Cash at bank and in hand 52.4 68.5
Short-term deposits 9.1 7.7
61.5 76.2
The fair value of cash and cash equivalents is £61.5m (2023: £76.2m).
Restricted cash at 30 September 2024 was £Nil (2023: £Nil).
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
ST Comms Language Specialist Proprietary Limited ("ST Communications")
On 3 October 2023, the Group acquired ST Comms Language Specialists
Proprietary Limited ("ST Communications"), a Cape Town based language services
provider for an initial consideration of £0.6m (US$0.675m) on a cash and debt
free basis with additional contingent consideration, deemed as remuneration of
£0.5m (US$0.675m) due in two equal instalments on the first and second
anniversary of the transaction.
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 consideration and goodwill were as follows:
Fair values
£m
Net assets acquired:
Trade and other receivables 0.3
Cash and cash equivalents 0.1
Trade and other payables (0.1)
Total identifiable net assets 0.3
Goodwill 0.3
Total consideration 0.6
The fair value of the total amounts paid and payable are as Deemed Remuneration payable £m Total consideration £m
follows:
Non-contingent consideration £m
Cash consideration payments made in the current period 0.6 - 0.6
Contingent consideration recorded in the current period and payable in cash - 0.3 0.3
Future contingent consideration payable in cash - 0.2 0.2
Total consideration 0.6 0.5 1.1
The difference between the total consideration and the carrying value of the
acquired assets and liabilities was allocated to goodwill. The fair values of
Trade and other receivables and other classes of assets and their gross
contractual amount are the same.
ST Communications contributed £0.3m to the Group revenue and £0.1m to profit
after tax in FY24. The goodwill of £0.3m on acquisition comprises the value
of expected synergies to be realised across future periods. Including the
integration of services work with the RWS language service teams, future
growth of a new and diverse customer portfolio and ability to provide clients
with solutions and technologies for rare languages. Integration of ST
Communications into the RWS Group has continued successfully during FY24.
Contingent payments dependent on continued employment are accounted for as
post-combination remuneration expenses in accordance with IAS 19 employment
benefits.
14. POST BALANCE SHEET EVENTS
There are no significant post balance sheet events.
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 charging amortisation
of acquired intangibles, impairments of other assets considered material and
one off in nature, 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 adjusted profit before tax: 2024 2023
£m £m
Statutory (loss)/profit before tax 60.0 (10.9)
Amortisation of acquired intangibles 40.8 38.8
Impairment losses 22.2 62.4
Acquisition costs 7.2 5.1
Share-based payment expense 2.9 1.8
Profit on sale of PatBase (30.0) -
Exceptional items (Note 5) 3.4 22.6
Exceptional finance costs 0.2 0.3
Adjusted profit before tax 106.7 120.1
Reconciliation of adjusted operating profit to statutory operating profit: 2024 2023
£m £m
Adjusted operating profit 112.3 123.8
Amortisation of acquired intangibles (40.8) (38.8)
Impairment losses (22.2) (62.4)
Acquisition costs (7.2) (5.1)
Share-based payment expense (2.9) (1.8)
Exceptional items (Note 5) 26.6 (22.6)
Statutory operating (loss)/ profit 65.8 (6.9)
Cash conversion: 2024 2023
£m £m
Adjusted profit before tax 106.7 120.1
Adjusted tax charge (26.6) (29.6)
Adjusted net income 80.1 90.5
Net cash inflow from operating activities 75.3 107.5
Exceptional cash flows 21.6 13.7
Purchase of PPE (2.6) (3.8)
Purchase of intangibles (40.5) (36.5)
Net interest (3.7) (2.0)
Lease liability payments (9.5) (11.9)
Free cash flow 40.6 67.0
Cash conversion 51% 74%
Organic Revenue
Organic revenue is calculated by adjusting the prior year's revenues. This
involves adding the revenues from acquisitions during the corresponding
ownership period and subtracting the revenues from disposal during the same
period such that prior year results are prepared on a common basis with the
current year.
2022 2023 2023 2024 2024 Organic revenue
Organic revenue
Organic revenue
Organic revenue1 Organic revenue
growth/(loss) 2024
growth/(loss) Organic
revenue growth/(loss) %
IP Services 104.8 (2.6) 102.2 0.1 102.3 0%
Regulated Industries 173.0 (10.5) 162.5 (16.0) 146.5 (10%)
Language Services 342.1 (12.3) 329.8 (2.7) 327.1 (1%)
Language & Content Technology 139.2 7.8 147.0 (4.7) 142.3 (3%)
Total 759.1 (17.5) 741.5 (23.3) 718.2 (3%)
1 Includes Liones Holdings B.V. and Propylon Holdings Ltd's pre-acquisition
operating results and PatBase pre-divestment operating results
Organic revenue at constant exchange rates
Organic revenue at constant exchange rates is calculated by adjusting the
prior year's revenues. This involves adding the revenues from acquisitions
during the corresponding ownership period and subtracting the revenues from
disposal during the same period such that prior year results are prepared on a
common basis with the current year and applying the 2024 foreign exchange
rates to both years.
2023 2023 2023 Organic revenue at constant exchange rates 2024 2024 Organic revenue Organic
Revenue at
Pre-acq revenue
Revenue growth
constant currency revenue growth
FY24 rates
at FY23 rates1
IP Services 101.6 (2.6) 99.0 3.3 102.3 3%
Regulated Industries 157.2 - 157.2 (10.7) 146.5 (7%)
Language Services 319.0 - 319.0 8.1 327.1 3%
Language & Content Technology 132.9 10.4 143.3 (1.0) 142.3 (1%)
Total 710.8 7.7 718.5 (0.3) 718.2 0%
1 Includes Liones Holdings B.V. and Propylon Holdings Ltd's pre-acquisition
operating results and PatBase pre-divestment operating results
Adjusted operating Profit
Adjusted operating profit is calculated by adjusting operating profit for the
impact of exceptional items, amortisation and impairment of acquired
intangibles, impairment of other assets considered material and one off in
nature acquisition costs and share based payments. This is further analysed in
Note 4 and labelled as 'Operating profit/(loss) before charging:'.
Glossary
Adjusted earnings per share or Adjusted EPS - is stated before charging
amortisation of acquired intangibles, impairments of other assets considered
material and one off in nature, acquisition costs, share-based payment expense
and exceptional items, net of associated tax effects.
Adjusted net income - is calculated as profit for the year adjusted for
amortisation of acquired intangibles, impairments of other assets considered
material and one off in nature, 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
of acquired intangibles, impairments of other assets considered material and
one off in nature, 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 of
acquired intangibles, impairments of other assets considered material and one
off in nature, 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 before exceptional cash flows, divided
by 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 11.
Organic - organic measures include pre-acquisition results of acquired
businesses and exclude revenues from disposals during the same period such
that prior year results are prepared on a common basis with the current year.
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