RWS Annual Report 2022 web - Flipbook - Page 113
Going concern
In making their going concern assessment, the Directors
have considered the Group’s current financial position
and forecast earnings and cashflows for the 18-month
period ending 31 March 2024. The business plan used
to support this going concern assessment is derived
from the Board-approved budget. The Directors have
undertaken a rigorous assessment of going concern
and liquidity taking into account key uncertainties and
sensitivities on the future performance of the Group. In
making this assessment the Directors have considered
the Group’s existing debt levels, the committed funding
and liquidity positions under its debt covenants and
its ability to continue generating cash from trading
activities.
As at 30 September 2022, the Group has net cash of
£25.2m comprising the Group’s US$220m revolving
credit facility (“RCF”) ( £29.3m drawn at year end) and
lease liabilities of £46.7m, less cash and cash equivalents
of £101.2m. The RCF matures in August 2026 but is
extendable for a further year subject to lender consent.
At year end the Group’s net leverage ratio (as defined by
the RCF agreement) is -0.11x EBITDA, while its interest
coverage ratio (as defined by the RCF agreement) is 64.2x
EBITDA and are well within the covenants permitted by
the Group’s RCF agreement.
In light of the Group’s principal risks and uncertainties
disclosed on page 44 of the Strategic Report, the
Directors believe that the appropriate sensitivity in
assessing the Group and Company’s ability to continue
as a going concern are to model a range of reasonably
plausible downside scenarios, including a 10% reduction
to the Group’s revenues and corresponding cash flows,
with mitigating actions from management limited to
equivalent reductions in the Group’s controllable cost
base. No significant structural changes to the Group
have been assumed in any of the downside scenarios
modelled with all mitigating actions wholly within
management’s control.
In each of these modelled downside scenarios, the
Group continues to have significant covenant and
liquidity headroom over the period through to 31 March
2024. Consequently, the Directors are confident that the
Group and Company will have sufficient cash reserves
and committed debt facilities to withstand reasonably
plausible downside scenarios and therefore continue to
meet its liabilities as they fall due for the period ending
31 March 2024 and therefore prepared the financial
statements on a going concern basis.
Business combinations
Under the requirements of IFRS 3 (revised), all business
combinations are accounted for using the acquisition
method (acquisition accounting). The cost of a business
acquisition is the aggregate of fair values, at the date
of exchange, of assets given, liabilities incurred or
assumed, and equity instruments issued by the acquirer.
Costs directly attributable to business combinations
are expensed. The cost of a business combination is
allocated at the acquisition date by recognising the
acquiree’s identifiable assets, liabilities and contingent
liabilities that satisfy the recognition criteria, at their
fair values at that date. The acquisition date is the date
on which the acquirer effectively obtains control of the
acquiree. The excess of the cost of the acquisition over
the fair value of the Group’s share of the net assets
acquired is recorded as goodwill.
Provisional fair values are provided when there has been
insufficient time to finalise a purchase price allocation
process. IFRS 3 allows a period of up to 12 months from
the date of acquisition for provisional fair values to be
revised.
Any contingent consideration, which is classified as
a provision, is measured at fair value at the date of
acquisition and subsequently remeasured to fair value at
each reporting date, until the contingency is settled. Any
changes in the fair value of contingent consideration are
recognised in profit or loss.
Foreign currencies
The presentation currency of the Group is British
Pounds Sterling.
Transactions in foreign currencies are translated into
the respective functional currencies of the Group at the
exchange rate on the dates of the transactions.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency
at the exchange rate at the reporting date. Nonmonetary assets and liabilities that are measured at
fair value in a foreign currency are translated into the
functional currency at the exchange rate when the
fair value was determined. Non-monetary items that
are measured based on historical cost in a foreign
currency are translated at the exchange rate at the date
of the transaction. Foreign currency differences are
normally recognised in profit or loss in the statement of
comprehensive income.
The assets and liabilities of the Group’s foreign
operations are translated at exchange rates prevailing
on the reporting date. Income and expense items
are translated using average exchange rates, which
approximate to actual rates, for the relevant accounting
period. Exchange differences arising, if any, are classified
as other comprehensive income and recognised in the
foreign currency reserve in the consolidated statement
of financial position.
Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at
exchange rates prevailing on the reporting date. The
Group has elected to treat goodwill and fair value
adjustments arising on acquisitions before the date of
transition to IFRS as sterling-denominated assets and
liabilities.
NOTES TO THE CONSOLIDATED STATEMENTS
RWS — Annual Report 2022
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