RWS Holdings plc 2016 Annual Report New horizons

RWS Holdings plc 2016 Annual Report

RWS Holdings plc 2016 Annual Report Europa House Chiltern Park Chiltern Hill Chalfont St Peter Bucks SL9 9FG Telephone +44 (0) 1753 480 200 Facsimile +44 (0) 1753 480 280 Email [email protected] www.rws.com Contents

2 RWS Holdings plc 2016 Annual Report Contents Contents

Company Overview 2

Financial Highlights 4

Chairman‘s Statement 6

Strategic Report 8

Board of Directors 12

Directors‘ Report 13

Statement of Directors‘ Responsibilities 16

Directors‘ Remuneration Report 17

Independent Auditor‘s Report to the Members of RWS Holdings plc 20

Financial Statements

Consolidated Statement of Comprehensive Income 23

Consolidated Statement of Financial Position 24

Consolidated Statement of Changes in Equity 25

Consolidated Statement of Cash Flows 27

Notes to the Consolidated Financial Statements 28

Parent Company Financial Statements 54

Company Statement of Changes in Equity 57

Notes to the Company Financial Statements 58

Shareholder information 65

2 RWS Holdings plc 2016 Annual Report RWS Holdings plc 2016 Annual Report 1 Company overview

RWS provides language and intellectual property services that support its clients in taking products from concept to market

Research and Patenting development

Information Patent & Filing A comprehensive range of patent search The translation of patent and supporting and monitoring services which enable intellectual property documents in over clients to check if their intellectual property 200 language pairs and the management is novel, valid for an application or risks of multi-jurisdictional patent filing supported infringing upon existing patents. RWS has by our international web-based filing also established Patbase as one of the platform, inovia.com. world’s largest searchable commercial patent databases covering over 57 million patent families, designed by professional searchers and sold on a subscription basis.

Technically and linguistically accurate Efficient processes supported by delivered to deadline sophisticated and proprietary technology Over 99% on time* Over 500 million words translated last year*

2 RWS Holdings plc 2016 Annual Report Our in-depth understanding of clients’ differing requirements as their product moves from research and development, to protection and commercialisation enables us to deliver consistently high-quality services at each stage of the product lifecycle, whilst giving RWS visibility of activity across the value chain

Clinical Trials, Commercialisation Patient Outcomes and Litigation

Life Sciences Technical & Commercial Translation A full suite of language solutions designed The translation of other specialist to support the entire life science industry. documents, from technical specifications The translation and linguistic validation and manuals to sensitive legal and of vital content for pharmaceutical, financial documents. Our work includes biotech and medical device companies the localisation of materials to ensure they including their clinical research are linguistically and culturally appropriate organisations, advertising agencies and in line with local regulations in multiple and other subcontractors. target markets.

Excellent quality control and customer service Over 99% of customers happy with the quality of our services*

*Source: RWS records

RWS Holdings plc 2016 Annual Report 3 Financial Highlights

30

30.6 Over 80,000 patent and IP 20 22.7 22.1

21.0 documents and 17.2 16.2 14.5 10 14.6 13.9 Adjusted PBT (£m) 65,000 life 11.0 9.0 science projects 7.4 6.0 0 5.6 per year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Market leader in intellectual property and A strong financial track record life science language and support services

7.8% increase in world-wide patent applications in 2015* c.800 employees 14% CAGR in US clinical ** including subject specialist trials 2011-2016 translators & checkers and project managers Strong reputation for quality and delivery with specialist staff supported by sophisticated technology Growing markets

13% sales growth at CTi since acquisition

RWS has a strong track record of executing earnings accretive acquisitions

*Source: World Intellectual Property Office, **Source: Number of clinical trials as recorded by ClinicalTrials.gov, a U.S. National Institutes of Health service

4 RWS Holdings plc 2016 Annual Report 5% Information 10% Commercial Translation

90% of revenues in highly specialised fields – intellectual property 20% and life sciences Life Sciences 65% Patent translation & filing

Medical & Aerospace Chemical Automotive Energy Manufacturing Technology Pharma & Defence & Telecoms

A diversified international, blue chip client base

Strong cash generation supports progressive dividend policy

13 years of dividend increases

Operations located to service customer needs globally

RWS Holdings plc 2016 Annual Report 5 Chairman’s Statement

I am pleased to report that RWS has delivered its generation. Other significant cash outlays included best year ever despite a far from robust global corporation tax of £5.2 million and dividends of economic backdrop. For the thirteenth consecutive £10.6 million. year since listing on AIM in November 2003, we have achieved growth in sales, underlying profits and Currency Effects and Hedging dividends, testimony to the strength of our market This year has been marked by considerable volatility positions in patent translations, intellectual property in global currency markets. This was compounded services and life sciences services. During the year, in the aftermath of the EU referendum in late June we have also continued to invest in those resources and the Group has benefitted from the resulting which can deliver future expansion. decline in sterling. RWS is a prolific exporter of its services meaning that over 85% of its revenues Results and Financial Review are non-sterling, its principal exposures being to The Group has achieved further significant progress the euro and the US dollar. The Group’s estimated in underlying operational performance, reflecting net exposure to the Euro has been hedged at an continued growth in the core patent translations average rate of 1 Euro = 83p for the whole of the business, together with growth in PatBase, year to 30 September 2017. The average rate and . In addition, the Group benefited from experienced over 2015-16 was 78.1p. Exposure a strong maiden contribution from CTi, the US life to the US dollar is largely offset by the five year sciences specialist it acquired in October 2015. US$45 million dollar loan drawn to acquire CTi. A material improvement in Group gross margins also contributed to our record results. Acquisition of a market leader in Life Sciences translations and linguistic validation Group sales advanced by 28% to £122.0 million The Group announced on 2 November 2015 that (2015: £95.2 million). Adjusted operating profit it had acquired the entire issued share capital before amortization of intangibles, share option of Corporate Translations Inc. (“CTi”) for a cash costs and acquisition expenses was up 40% at consideration of US$70 million. This acquisition was £32.0 million (2015: £22.9 million). in line with our stated strategy of complementing organic growth with selective acquisitions which Adjusted profit before tax, amortization of have growth potential in attractive sectors and/or intangibles, share option costs and exceptional geographies, offer excellent margins and enhance acquisition expenses increased by 35% to shareholder value. £30.6 million (2015: £22.7 million). This produced an increase of 35% in adjusted earnings per share to The acquisition of CTi established a significant Group 10.9p (2015: 8.1p). presence in the USA which the Board believes is the largest growth opportunity for RWS. CTi is one Reported profit before tax was £25.1 million (2015: of the world’s leading life sciences translation and £20.7 million). This result reflected significantly linguistic validation providers. It enjoys a preferred greater amortization of intangibles largely driven by supplier relationship with many of its key clients, the CTi acquisition and totalling £4.6 million (2015: with extraordinary penetration of the blue chip life £1.6 million), offset by lower share based payment sciences community. CTi’s greater scale, combined costs. Basic earnings per share were 9.0p (2015: with the existing RWS specialist divisions, provided 7.3p), a rise of 23%. The Group’s effective tax rate a step change in the Group’s competitive standing was 22.9% (2015: 24.8%). amongst the major pharmaceutical groups and contract research organisations, whilst RWS’ strong As of 30 September 2016, shareholders’ funds foothold in Europe is already supporting CTi’s had reached £108.7 million (2015: £85.7 million). expansion into the European life sciences sector. At 1 October 2015 the Group had net cash of £30.6 million. The Group ended the 2016 financial Funding for the acquisition was via a combination of year with net debt of only £1.5 million, after the a US$45 million five-year bank loan and the Group’s £47.1 million cash consideration for CTi which was internal cash resources. acquired at the end of October 2015, demonstrating the Group’s continued strong underlying cash

6 RWS Holdings plc 2016 Annual Report Chairman’s Statement (continued)

The acquisition of CTi has been immediately People and significantly earnings enhancing, with the The very nature of the Group’s activities dictate that US$70 million consideration based upon CTi reporting it will always be dependent upon the quality and in excess of US$7 million EBITDA for the year ended dedication of its entire staff to meet the demands 31 December 2015. We have now completed the for high quality and timely delivery required by its integration of CTi with our Medical Translation worldwide clients. Group headcount reached 792 full Division, which included the linguistic validation time equivalents at the year-end (2015: 621), which specialist PharmaQuest, and we now report on it as includes the 143 CTi employees who joined the part of our combined life sciences activities. We were Group upon acquisition. I wish to place on record my also pleased to have appointed Sheena Dempsey thanks to all of our employees for their contribution as Chief Executive Officer of CTi in early September, to the Group’s excellent results. following the anticipated departure of the CTi vendors after a hand-over period. She brings a wealth of Corporate Social Responsibility experience and knowledge of the life sciences space RWS has always sought to be a socially responsible and is a welcome addition to our strong operational Group which has a positive impact on the management team across the Group. communities it operates in. We look to employ colleagues who reflect the diversity of the Group’s Dividend communities. No discrimination is tolerated, and we I am pleased to announce that the Board has endeavour to give all employees the opportunity to recommended a final dividend of 4.45p per share. develop their capabilities. We provide an excellent The interim dividend, paid in July, was 1.15p per working environment, the latest technology and share, so the total payout in respect of the year will appropriate training. amount to 5.6p per share, an increase of 15% over 2015 reflecting the Group’s earnings growth during RWS’ staff contribute generously on a monthly basis 2016 and the Board’s confidence in the Group’s to a wide selection of local and national charities continued progress. This proposed payout marks a chosen by the staff, and their contributions are thirteen-year unbroken record of increases in the matched by the Group. dividend since flotation in November 2003. Current Trading and Outlook The proposed total dividend is 1.6 times covered The Group has made a very strong start to the new by basic earnings per share. Subject to shareholder financial year, benefiting from significant underlying approval at the Annual General Meeting, the final growth in revenues, better gross margins and dividend will be paid on 24 February 2017 to all currency tailwinds. shareholders on the register at 27 January 2017. The shares will trade ex-dividend on 26 January 2017. The Board remains highly encouraged by the Group’s opportunities to continue to grow significantly and Share Option Plan profitably across its now broader portfolio of market RWS announced on 4 April 2013 that the Board had leading businesses, particularly as it looks to build on approved a new share option plan for executive its position in life sciences in the USA. Directors and senior managers, under which options would be granted over ordinary shares representing The Group’s strong cash generation and healthy up to a maximum of 4% of the Group’s share capital. balance sheet leave us well positioned to pursue that The plan is designed to further align the interests of growth through acquisitions and organic investment, senior employees with shareholders and to promote whilst also maintaining our progressive dividend the retention of the Group’s senior executives. policy.

Options over 4% of the Group’s share capital have Andrew Brode been issued to ten participants, with a subscription Chairman price of 129.2p per share. The earliest vesting date 6 December 2016 is 3 April 2015 and the latest exercise date is 3 April 2021. A total of 4,184,810 options were exercised during the year.

RWS Holdings plc 2016 Annual Report 7 Strategic Review

Business Model Organic growth is driven by: RWS is the world’s leading provider of intellectual – increases in the worldwide patent filing activities of property (IP) support services (patent translations, existing and potential multinational clients international patent filing solutions and searches), high level technical and commercial translation – the development of new drugs by the services and, following the acquisition of Corporate pharmaceutical industry Translation Inc, a leading provider of translation and linguistic validation services to the life sciences – the outsourcing by corporates, clinical research sector. RWS has a blue chip multinational client organisations, law firms and attorneys of all or part base spanning Europe, North America and Asia, of their foreign patent search, filing and translation particularly active in patent filing in the medical, and linguistic validation processes. pharmaceutical, chemical, aerospace, defence, automotive and telecoms industries. The Group’s – the growing demand for language services and principal business activities are: the Group’s ability to increase its market share by winning new clients attracted by its leading position – Patent translations and filing, which currently and reputation, in an otherwise fragmented sector accounts for over 65% of Group revenue. RWS and in new and/or growing geographies differentiates itself from the competition through the quality of its translations, its high level of IP – increasing market share, particularly in the patent expertise and customer service and the use of translation and life sciences markets its international web based patent filing platform, ‘inovia’. Uniquely, the business employs over – the retention of our client base, which includes 100 full time highly qualified translators. a large share of the top 20 patent filers both in Europe and globally, many of which will use – Following the acquisition in October 2015 of the Group for substantially all of their patent Corporate Translations Inc, RWS has established a translation requirements, and separate division, focussed solely on the language service needs of the life sciences market, providing – the addition of new clients each year with whom technical translations and linguistic validation to activity levels build up over time. large pharmaceutical corporations and clinical research organisations in North America and In terms of acquisitive growth, we continue to Europe. search for suitable potential acquisitions in the intellectual property support services and specialist – Information, which includes a comprehensive commercial translation spaces, with our primary range of patent search, retrieval and monitoring focus currently on life sciences in the USA. We seek services as well as PatBase, one of the world’s niche businesses capable of delivering well above largest searchable commercial patent databases, industry average levels of profitability or highly access to which is sold exclusively as an annual complementary businesses capable of reinforcing subscription service. the Group’s dominant position in intellectual property support and language services. – Commercial translations, with a particular emphasis on technical translations. We are particularly pleased to be able to show our progress against these stated objectives with Our Strategy 13 straight years of sales and profit growth since RWS’ objective is to increase shareholder value by flotation. growing the Group’s revenue and profit before tax.

Our strategy to achieve this is focused upon organic growth complemented by selective acquisitions, providing these can be demonstrated to enhance shareholder value.

8 RWS Holdings plc 2016 Annual Report Strategic Review (continued)

Annual Revenue £m Selling IP services under the RWS inovia brand, the US and European sales teams continue to develop 120 opportunities with large international patent filers 100 which will support FY17 sales. In Asia we continued 90 successfully with our strategy to target Japanese and 80 Chinese international filers for our patent translation 70 and filing services. Sales from Japan are supporting 60 our current growth, while progress in China with 50 a number of innovators is expected to support 40 additional growth in the medium term. China 30 20 continues to attract North American and European patent filers seeking patent protection there, as a 54.1 55.7 46.2 95.2 60.6 93.6 40.8 68.8 27.3 65.4 77.4 35.9

10 31.0

122.0 result of which our headcount in China has grown

0 to 70 employees (2015: 63). We are operating from 2004 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 three locations and have continued to develop production and training centres with several Chinese Annual Adjusted PBT £m universities. These centres enable the Group to expand its Chinese offering but at a lower cost than 30 in Beijing. We have also continued to expand our long term relationships with international patent 25 bodies seeking to enlarge their collections of translated Chinese patent prosecution documents. 20 Life Sciences 15 The Group’s life science division accounts for 20% 10 of the Group’s sales (£24.4 million compared to £4.2 million in 2015) and focuses on the language 5 service requirements of Pharmaceutical corporations 5.6 7.4 9.0 6.0 and Clinical Research Organisations. 22.1 22.7 16.2 17.2 14.5 30.6 14.6 13.9 11.0 21.0

0 The results of this division include the sales of RWS 2016 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2004 businesses which service the life sciences sector, namely PharmaQuest and Medical Translation Operating Review Division (“MTD”) and were previously included within the Commercial Translations division, in addition Patent Translations and Filing to an 11 month revenue (US$30.5 million (2015: The Group’s core patent translation and filing US$27.0 million), contribution from CTi since its business (including inovia) represents 65% of acquisition in October 2015. Group sales and grew revenues by 8% to £79.4 million (2015: £73.3 million). This performance During the year we successfully completed a reflects earlier client wins, organic growth from the thorough market search for a new CEO ahead of established client base, and further strong growth the anticipated departure of the vendors of CTi in China. The macroeconomic background delivered who wished to pursue philanthropic ventures. In further grounds for confidence with record numbers early September we announced the appointment of of new patent applications in 2015. Sheena Dempsey. As described in more detail below, RWS has successfully completed the integration of The Group has maintained its market leadership, PharmaQuest and MTD with CTi such that all 3 having recently successfully renewed master service businesses now operate on the same operating agreements with many of its top clients. It services system, using the same process and report to 11 of the top 20 applicants at the World Intellectual Sheena. Property Office and 12 of the top 20 applicants at the European Patent Office in 2015.

RWS Holdings plc 2016 Annual Report 9 Strategic Review (continued)

Commercial Translations Market Update The commercial translations business, which accounts for 10% of Group sales and operates in the Patent Filing Statistics UK, and , reported a 2% growth The World Intellectual Property Office (WIPO) has in revenues to £11.9 million (2015: £11.7 million) published figures showing a 7.8% world-wide (after restatement for the move of PharmaQuest and increase in patent applications in 2015; a higher MTD revenues to the new life sciences division). We growth rate than the 4.5% seen in 2014. Overall have grouped all non-patent and non-life science growth is driven by Chinese domestic applications, translations in this service line and it remains with the US still being the most active in international the segment of our business most exposed to filing. Filings are under the two main international competition. Given the intensity of the competition, filing systems, the PCT (Patent Cooperation Treaty) we continue to focus upon specialist niches and and the European Patent; PCT numbers increased larger projects where the Group’s resources and by 1.7% to 218,000 and European Patent application expertise can provide a competitive edge and to numbers by 1.6% to 278,867 in 2015. investigate ways of improving margins through production process efficiencies. Risk Management The Group maintains a risk register which is The recently established German patent translation reviewed and assessed on an annual basis by the facility is steadily growing and will both balance the Board of Directors. The key risks to the business are cyclical effect evident in the commercial translation errors in the provision of the Group’s services, in a activities and improve Germany’s contribution to mismatch between currencies (especially as between Group margins through better utilisation of existing the Euro and Sterling), in regulatory changes to resources. patent translation requirements in Europe, in the emergence of new translation technologies, and the The commercial translation business does enable failure to successfully integrate acquired businesses RWS to offer customers a complete solution to their into RWS. Additionally, as with any people business translation needs whilst continuing to provide good delivering high quality services, the Group depends cross selling opportunities for the patent translation upon its ability to attract and retain well trained staff. and life sciences businesses, which have already made use of interpreting services provided by Group These risks are mitigated as follows: company Eclipse. – Failings in service provision are most likely to arise as a result of human error. RWS was the first Information language services provider and, independently, The information business accounts for 5% of Group the first search company to adopt ISO certification sales and reported revenues up 7% to £6.4 million and invests in exhaustive and regularly updated (2015: £6.0 million) reflecting several successful procedures to minimise the risk of error. In client wins and a good flow of regular work from addition, the Group carries substantial professional a number of clients. The high margin subscription indemnity insurance. service – PatBase – grew by 7.2% during the year. – As previously reported, currency risk is partly We have continued to invest in PatBase searchability, mitigated via hedging operations. content, analytics and geographic coverage as well as – We have in the past drawn the market’s attention in a robust, state of the art infrastructure to secure to the proposed European Union Patent (“the the resilience of the platform which provides 24/7 Unitary Patent”) and its potential impact upon the worldwide access. Group’s profits and the uncertainty around the timetable for its implementation. As one of the three largest patent filers in Europe, the UK would play a key role in the future administration of the Unitary Patent and has been designated as one of the three countries to host a Unitary Patent court. Given the UK’s ‘Brexit’ vote, there was considerable uncertainty as to whether the UK would ratify the Unitary Patent prior to its exit from the European

10 RWS Holdings plc 2016 Annual Report Strategic Review (continued)

Union. However, on 28 November 2016 the UK The framework for and experience gained from this government announced that it is proceeding with successful CTi and RWS integration will be utilised preparations to ratify the Unified Patent Court on future acquisitions. Agreement, which could see the UP introduced in the second half of 2017. – The Group has always embraced new translation technologies and used them to good effect in As previously reported, there is scepticism among order to maintain and improve margins, efficiency applicants and the IP profession both as regards and competitiveness. Recognizing advances in the UP’s jurisdiction and also the actual financial machine translation technology (MT), we have just benefits for those applicants which do not completed an internal programme to investigate require Europe-wide patent coverage. Because and trial best MT use and have started integrating the proposed Unitary Patent will run in parallel MT engines into the translation workflow in with the existing system, it will not provide any appropriate areas along with Translation Memory financial advantage to many corporates who only technology. Very recently, substantial technological seek patent protection in selected key countries. progress has been made with the introduction of In addition, corporates using the Unitary Patent Neural Machine Translation (NMT) engines, which scheme for the first time will also run the risk of will also be employed by the Group following a new and untried intellectual property litigation further testing and supplier selection. It is clear system. that the market for general translations will be further eroded by NMT and that a successful LSP To date there has been insufficient guidance from (Language Services Provider) needs to focus on the UK Government as to the terms it will seek for premium quality translation work in critical areas, UK’s exit from the EU. The uncertainty of whether such as IP and life sciences the UP will still cover the UK when it finally exits the EU could add further reluctance to using the new – As a significant employer in the local area of South system. We therefore anticipate a minimal loss of Buckinghamshire, we believe we offer stability of revenue in FY17 and we will be closely monitoring employment, competitive salaries and an excellent client reaction and legal developments over the working environment. In the current economic next six months to establish the impact/position climate, we have been successful in recruiting for FY18 and beyond. high calibre staff as required, but competition for talented people to work on the periphery of the – In October 2015, RWS acquired CTi with the London conurbation is undoubtedly intensifying, as intention of building a single life sciences business evidenced by the exceptionally low unemployment with greater global reach. The subsequent statistics for the area. integration focussed on merging RWS’ smaller existing life science businesses of PharmaQuest On behalf of the Board and MTD into CTi. This integration work included retraining staff, the consolidation of customers and Richard Thompson suppliers, and establishing strong IT links between 6 December 2016 the businesses. This work is now complete.

The supplier consolidations have reduced technical costs and improved margins, whilst the consolidation of customers has improved the focus of our service offering and enables RWS to provide its life science customers with a consistent, high level of service across both their US and European operations. In addition, cross-selling opportunities have already been identified and are beginning to yield positive results as well as enhancing our sales pipeline.

RWS Holdings plc 2016 Annual Report 11 Board of Directors at 30 September 2016

Andrew S Brode (76) Peter Mountford (59) Chairman Non-Executive Director

Member of the Audit Committee and the Chairman of the Audit Committee and member Remuneration Committee of the Remuneration Committee

Appointed as a Director 11 April 2000 Appointed as a Director 11 April 2000

Founder of Bybrook and led the management Chairman of Mountford Capital Limited, Chairman buy in of the RWS Group. A substantial shareholder of Heropreneurs and a Non-Executive Director in the Company of a number of other private companies

Non-Executive Chairman of Learning Technologies Group plc and Electric Word plc and Non-Executive Elisabeth A Lucas (60) Director of a number of private companies Non-Executive Director

Member of the Audit Committee and the Reinhard Ottway (57) Remuneration Committee Chief Executive Officer Joined RWS Group in 1977, Managing Director Appointed as a Director 1 January 2012 of Translations Division from 1992 and Chief Executive Officer from 1995 to 2011 Joined RWS Group in 1994 and was Business Development Director from 2001 Appointed as a Director on 11 November 2003

Richard Thompson (54) Deputy Chief Executive Officer Registered office Finance Director and Company Secretary Europa House Chiltern Park Appointed as a Director and Company Secretary Chiltern Hill 28 November 2012 Chalfont St Peter Buckinghamshire Previously worked for Actix International Limited, SL9 9FG a global supplier of software and services to the telecommunications market Company registration number David E Shrimpton (73) 03002645 Senior independent Non-Executive Director and Deputy Chairman

Member of the Audit Committee and Chairman of the Remuneration Committee

Appointed as a Director 1 January 2010

Non-Executive Director of a number of private companies

12 RWS Holdings plc 2016 Annual Report Directors’ Report

The Directors present their annual report together the next 12 months from the date these financial with the audited consolidated financial statements statements were approved. for the year ended 30 September 2016. Financial instruments Business performance and risks Information about the use of financial instruments The review of the business, operations, principal risks by the Group is given in note 18 to the financial and outlook are dealt with in the Strategic Review statements. on pages 8 to 11. The key performance indicators of the Group are revenues and adjusted pre-tax profit Directors before amortization of acquired intangibles, share Details of members of the Board at 30 September option costs and acquisition costs. 2016 are set out on page 12.

Financial results The interests of the Directors in shares during The financial statements set out the results of the the year are set out on page 18 in the Directors‘ Group for the year ended 30 September 2016 which Remuneration Report. are shown on page 23. Peter Mountford and Richard Thompson retire by Group revenues advanced by 28.2% to rotation at the Annual General Meeting and being £122.0 million (2015: £95.2 million) and pre-tax eligible offers themselves for re-election. profit before amortization of intangibles, share option costs and exceptional costs was £30.6 million The Company‘s Annual General Meeting will be held (2015: £22.7 million), a rise of 34.8%. Profit before in London on 14 February 2017. tax is £25.1 million (2015: £20.7 million). The total tax expense was £5.8 million (2015: £5.1 million) an Directors‘ indemnities effective tax rate of 22.9% (2015: 24.8%). As permitted in its articles of association, the Directors have the benefit of an indemnity which is a Basic earnings per share was 9.0 pence (2015: third party indemnity provision as defined in section 7.3 pence). 234 of the Companies Act 2006. The indemnity was in force throughout the last financial year and is Dividends currently in force. (The Company also purchased and The Directors recommend a final dividend of maintained throughout the financial year, Directors 4.45 pence per Ordinary share (see note 8) to be and Officers liability insurance in respect of itself and paid on the 24 February 2017 to shareholders on the its Directors). register at 27 January 2017, which, together with the dividend of 1.15 pence paid in July 2016 makes a total dividend for the year of 5.60 pence (2015: 4.88 pence). Corporate governance The final dividend will be reflected in the financial statements for the year ending 30 September 2017. The Board The proposed total dividend per share is 1.6 times Throughout the year the Board comprised the covered by basic earnings per share. Chairman, two Executive and three Non-Executive Directors. The Board considers that all of the Non- Going concern accounting basis Executive Directors are independent in character The Group had cash resources of £27.9 million and judgement and that there are no relationships at 30 September 2016 and an overall net debt or circumstances which are likely to affect their of £1.5 million following the funding of the CTi independent judgement. The Board notes that acquisition. The Group was able to generate free Elisabeth Lucas was previously the Chief Executive cash flow of £23.1 million in the year. The Directors of the Company, however they believe that her in have considered the recent operating results, the depth knowledge and experience of working with acquisition of CTi and the associated debt along RWS, in the language services industry, gives her with the financial position and have a reasonable a unique insight into the Company‘s operations and expectation that the Group has adequate resources markets, making her a very valued member of the to continue in operation as a going concern for RWS Board.

RWS Holdings plc 2016 Annual Report 13 Directors’ Report (continued)

The Executive Directors have direct responsibility Remuneration Committee for business operations whilst the Non-Executive Further information about the Committee and the Directors have a responsibility to bring independent, Company‘s remuneration policy is set out on pages objective judgement to bear on Board decisions. 17 to 19 in the Directors‘ Remuneration Report. The Board met six times during the year to review financial performance and approve key business Internal controls and risk management decisions, so that it retained control over strategic, The Board has overall responsibility for the Group‘s budgetary, financial and organisational issues and system of internal controls. The system is designed monitored executive management. In addition to to manage rather than eliminate the risk of failure the Executive Directors, the members of the Senior to achieve business objectives and can only provide Executive Team are: reasonable and not absolute assurance against Charles Sitch, Managing Director UK Translations material misstatement or loss. Division; Neil Simpkin, Deputy Managing Director UK Translations Division; Jo Hindley, Commercial The Directors believe that the Group has internal