RNS Number:8765I
SDL PLC
22 February 2005
Preliminary Results - Bullet 5, the profit and loss account and note 5 amended
for adjusted diluted earnings per share (before amortisation of goodwill and
intangibles of #4.9m) of 6.72p (2003: 5.49p), an increase of 22%.
22 February 2005
SDL PLC
Preliminary Results for the Year ended 31 December 2004
SDL plc ("SDL" or "the Group"), the world's leading provider of translation
services and technology solutions, is pleased to announce its unaudited
preliminary results for the year ended 31 December 2004.
Highlights:
* Turnover at #62.7m (2003: #64.4m) up 2% at constant exchange rates
* Pre-tax profit ahead of expectations at #5.3m, before amortisation of
goodwill and intangibles (2003: #4.1m), an increase of 29%
* Pre-tax profit of #0.5m, after amortisation of goodwill and intangibles
(2003: loss #0.8m)
* EBITDA profit up 10% at #6.3m (2003: #5.7m) after software development
costs of #2.5m (2003: #2.6m), which are written-off as incurred
* Adjusted diluted earnings per share (before amortisation of goodwill and
intangibles of #4.9m) of 6.72p (2003: 5.49p), an increase of 22%
* Basic and diluted loss per share (after amortisation of goodwill and
intangibles of #4.9m) of 1.77p (2003: loss 3.30p)
* Net funds of #11.4m (2003: #7.2m)
Commenting on the preliminary results Mark Lancaster, Chairman and Chief
Executive of SDL, said:
"Revenue growth has continued, at constant exchange rates, and our marked rise
in profitability has been a function of our investment in structure and the
application of our translation management software and systems. Our
Knowledge-based Translation System (KbTS), launched in 2004, has been well
received and achieved some early benefits for SDL and its customers in its
application on new business with Case New Holland and Best Western Hotels. Our
investment in technology and our global footprint now leave SDL well positioned
in what is a growing but competitive market. As a result of the above
investment we are able to provide cost effective, high quality localization
services to our customers.
In the final quarter of the year we were able to announce that SDL is now a
premier supplier to Microsoft, which should provide significant revenues in the
current year and thereafter.
We expect to see continuing strategic opportunities to emerge in 2005 as large
and medium sized enterprises apply Business Process Outsourcing to their
localization requirements. The focus for 2005 is on leveraging the investment
made to date in software and infrastructure to drive sales forward, but more
importantly profits. We therefore expect to see solid revenue growth and
continued growth in profits in the current year.
For further information please contact:
SDL plc On 22 February 2004 tel: 020 7831 3113
Thereafter tel: 01628 410 127
Mark Lancaster, Chief Executive
Financial Dynamics Tel: 020 7831 3113
Edward Bridges/Juliet Clarke
Background information
About SDL:
SDL International (London Stock Exchange: 'SDL') is the world's leading provider
of translation services and technology solutions. Employing over 1300 staff
worldwide, its comprehensive and integrated offerings include translation
memory, adaptive machine translation, a full range of localization services and
the world's first knowledge-based translation system.
Whether insourcing or outsourcing, organizations benefit from enhanced
translation productivity through SDL's commitment to continuous innovation in
software and service delivery. Its customers span consumer, SME and enterprise
markets, including global industry leaders Adobe, Bayer, Bosch, Canon, DAF,
Kodak, Microsoft, Morgan Stanley, Reuters and SAP. SDL International is
headquartered in the UK and has over 40 offices across North America, Asia and
Europe. For more information, visit www.sdl.com.
Attached: Chairman's statement
Unaudited Consolidated Profit and Loss Account
Unaudited Consolidated Balance Sheet
Unaudited Consolidated Cash Flow Statement
Notes to the unaudited Financial Statements
STATEMENT OF CHAIRMAN AND CHIEF EXECUTIVE
Financial Highlights
2004 has proved to be another solid year for SDL. Reported profit before
taxation and goodwill amortisation increased by 29% to #5.3 million (2003: #4.1
million) despite a 3% reduction in Group revenues to #62.7 million (2003: #64.4
million). Revenue in 2004 at constant exchange rates was up 2%. The apparent
decline of 3% was due in part to exchange rate losses, primarily on the weak US
dollar, which accounted for 4%, with price erosion accounting for a further 3%.
The actual increase in translation volume was 5%. The Group's increase in
profits was primarily due to the utilisation of our technology, infrastructure
efficiencies and increased software license sales of our desktop technology.
The Group's net funds were #11.4 million as at 31 December 2004 (2003: #7.2
million).
Business Process Outsourcing - a growing trend in the localisation market
Translation is becoming a higher priority for global companies, as they
consolidate vendors and centralise spend. We are seeing new industries requiring
higher levels of translation. There are also notable changes in the revenue mix,
with a move away from the traditional IT dominated sector to that of
pharmaceutical, automotive and financial service verticals. This shift to other
industries brings with it different needs and a different way of thinking when
working with the customer. We have seen a significant number of these new
customers consolidating their translation suppliers to a single vendor, a move
being spearheaded by procurement departments in order to reduce costs. Most
importantly the move by our clients towards consolidating vendors and
outsourcing more business process has enabled them to maximise efficiencies and
brought us larger longer-term contracts with companies such as Microsoft and
Atlas Copco.
Technology Innovation and Market Leadership
An important trend in our business is the increasing sales of our Desktop
translation software. Although our Desktop software is a small contributor in
group revenue terms, the growth in revenue has been over 65% in the last year
and consequently we are expecting it to contribute to group profits in 2005. We
now have over 30,000 units of our translation memory product in the market
place, with our market share increasing from 7% in 2003 to 20% in 2004 and
projected to exceed 25% in 2005. We believe that this increase in adoption in
2004 is primarily due to the advanced design and ease of use. Our translation
memory technology is a cornerstone of our enterprise technology, being
completely integrated into our enterprise translation management products. Of
the new corporate client service business won in 2004, 50% of the revenue has
incorporated an enterprise software component providing clients such as Sony and
Philips with a full business process outsourcing model. We expect this trend to
continue, as the value and real savings to the customer are significant.
Efficiencies Through Global Infrastructure And Offshore Organisation
Our ongoing investment in high quality local language production centres in key
locations around the world also fits well with the evolving customer needs
towards business process outsourcing. Our recent investment in Central European
offices located in Poland, Czech Republic, Slovenia, Croatia, Romania and
Hungary provides highly skilled, cultural translations for customers such as
Kodak and Hewlett Packard. Investing in local country offices has been one of
the most important long term investments SDL has made over the last 5 years. SDL
has production offices in most of the key commercial regions across the world,
comprising of local language experts that utilise common SDL process and systems
creating an integrated world wide structure. This provides customers with the
highest possible culturally sensitive translations in high volumes. Our
continued investment in low cost regions, such as Thailand and China, provides
our customers with skilled resources at low cost, thereby offsetting pricing
pressure. All of our 40 offices are integrated through our virtual private
network, which is administered through our central Empower Management
Information System. The above investments, which were made in previous years,
are now showing significant returns as they start to deliver solid profits in a
competitive market.
Market Leaders In e-Business Growth
Our online translation portals, FreeTranslation.com and Click2Translate.com have
become a valuable business channel. FreeTranslation.com, a portal considered to
be the market leader in instant translation with over 2 million visitors per
week, and Click2Translate.com, which provides paid for translation services to a
broad range of customers, have contributed $1m of high margin localization
business in 2004, a three-fold increase over 2003. The revenue from these
portals is set to increase significantly in 2005. These public portals also
provide our customers with a smooth upgrade path to our private Enterprise
Technology portals for ongoing high volume translation users.
Innovation and Thought Leadership
The SDL Knowledge-based Translation System "SDL KbTS" surpassed our expectations
in 2004 by delivering over $2m of high margin localization revenue and, more
importantly, providing high quality low cost translations to our customers. Cost
savings of 20% to 40% over traditional human translation and speed improvements
of 40% to 50% were achieved. We consider this to be a major breakthrough in the
translation industry, allowing SDL to enter new market sectors and horizontal
markets where conventional translation methods have not provided sufficient
return on investment, speed and accuracy. We expect the technology to be
particularly useful for companies with high volumes of content and those that
require continual updating of perishable content such as news internet sites.
This allows us to continue to de-couple increases in revenue from additional
headcount requirements and provides the Group with an increased competitive
advantage and margin enhancement.
SDL already leads the translation industry in producing efficient ergonomic
technology that truly integrates the intelligent human activity with repetitive
production activities. In Q2 2005 SDL will be releasing an advanced Translation
Management System. Based on our 2004 SDL WorkFlow system, it combines our
workflow technologies with human activity to provide efficient management of the
complete translation process. The product will provide further productivity
enhancements on our integrated workflow and translation management technology
being used by companies such as Computer Associates, Sun and Morgan Stanley,
providing additional cost savings of between 20-30%.
Outlook
We expect to see continuing strategic opportunities emerge in 2005, as we
continue to penetrate new markets and larger corporations move towards more
efficient business process outsourcing. This combined with the business wins
late last year should create solid sales growth in 2005. We anticipate that the
multinationals will continue to look for cost savings through business process
outsourcing, which fits well with our size and infrastructure. Knowledge-based
Translation will also play a key role in 2005, providing our strategic customers
with immediate returns on investment for translated content. We expect
e-business revenue to continue to grow significantly in 2005, fuelling the need
for web sites to be translated and the need for our technology to manage
multilingual web site content efficiently. Pricing pressure will continue to be
present as larger companies move to a more mature business process outsourcing
model. However our technology and infrastructure should offset this, whilst
providing SDL with a competitive advantage in the translation market. We
therefore expect to see solid revenue growth and continued growth in profits in
the current year.
There is potential for more consolidation in the localization industry, both in
the service and technology arenas. SDL will participate in M&A activity only
when it is appropriate, primarily when it improves our strategic position and
provides long term value to SDL.
Mark Lancaster
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2004
Unaudited
Notes 2004 2003
#'000 #'000
GROUP TURNOVER (2) 62,690 64,378
Cost of sales (36,840) (37,705)
----- -----
GROSS PROFIT 25,850 26,673
Administrative expenses (25,491) (27,321)
----- -----
TOTAL operating PROFIT/(LOSS) (3) 359 (648)
Operating profit excluding amortisation of goodwill and
intangible fixed assets 5,215 4,261
Amortisation of goodwill and intangible fixed assets (4,856) (4,909)
Other interest receivable and similar income 128 66
Interest payable and similar charges (30) (222)
----- -----
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE
taxation 457 (804)
Tax on profit/(loss) on ordinary activities (4) (1,435) (984)
----- -----
LOSS on ordinary ACTIVITIES after
taxation (978) (1,788)
Dividends (9) - -
----- -----
retained LOSS for the
financial year (978) (1,788)
----- -----
Loss per share - basic and diluted (pence) (5) (1.77) (3.30)
Adjusted diluted earnings per share (pence) (5) 6.72 5.49
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Notes Unaudited
2004 2003
#'000 #'000
Loss for the financial year attributable to members
of the parent company (6) (978) (1,788)
Exchange difference arising on retranslation of net assets of
subsidiary undertakings (6) 532 278
---- ----
Total recognised losses relating to the year (446) (1,510)
---- ----
UNAUDITED CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2004
Unaudited
Notes 2004 2003
#'000 #'000
FIXED ASSETS
Intangible assets 19,576 24,423
Tangible assets 2,631 2,560
---- ----
22,207 26,983
________ ________
CURRENT ASSETS
Debtors 13,746 13,057
Cash at bank and in hand 11,452 7,295
---- ----
25,198 20,352
CREDITORS: amounts falling due within one year (12,945) (12,316)
---- ----
NET CURRENT ASSETS 12,253 8,036
---- ----
TOTAL ASSETS LESS CURRENT LIABILITIES 34,460 35,019
CREDITORS: amounts falling due after one year - (19)
PROVISIONS FOR LIABILITIES AND CHARGES (8) (548) (1,154)
---- ----
33,912 33,846
---- ----
CAPITAL AND RESERVES
Called up share capital (6) 561 542
Share premium account (6) 44,165 43,569
Shares to be issued (6) 213 316
Profit and loss account (6) (11,027) (10,581)
---- ----
SHAREHOLDERS' FUNDS - ALL EQUITY INTERESTS 33,912 33,846
---- ----
UNAUDITED CONSOLIDATED CASHFLOW FOR THE YEAR ENDED
31 DECEMBER 2004
Unaudited
Notes 2004 2003
#'000 #'000
NET CASH INFLOW FROM OPERATING ACTIVITIES (7) 5,916 4,470
________ ________
RETURN ON INVESTMENTS AND SERVICING
OF FINANCE
Interest received 128 66
Interest paid (5) (184)
Finance lease interest (25) (38)
---- ----
98 (156)
________ ________
TAXATION (1,142) (479)
CAPITAL EXPENDITURE
Payments to acquire tangible fixed assets (1,064) (1,363)
Receipts from sale of tangible fixed assets 62 351
---- ----
(1,002) (1,012)
________ ________
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings (123) (822)
Net cash acquired with subsidiary undertakings - 623
---- ----
(123) (199)
---- ----
NET CASH INFLOW BEFORE FINANCING 3,747 2,624
________ ________
FINANCING
Proceeds from issue of ordinary share capital (6) 512 21
Repayment of short term and long term loans (17) (1,437)
Capital element of finance lease rental payments (50) (557)
---- ----
445 (1,973)
---- ----
INCREASE IN CASH (7) 4,192 651
---- ----
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRELIMINARY FINANCIAL STATEMENTS
These preliminary financial statements do not constitute statutory accounts
within the meaning of section 240 of the Companies Act 1985 and are
unaudited. The statements have been prepared on the same basis as set out in the
previous year's annual accounts.
Financial information for the year ended 31 December 2003 has been extracted
from the statutory accounts which have been filed with the Registrar of
Companies. The auditor's report on those accounts was unqualified and did not
contain any statement under section 237 of the Companies Act 1985. The audit
report for the year ended 31 December 2004 has yet to be signed.
Certain comparatives have been restated to be consistent with the current year
presentation of costs. Staff costs of #1 million previously recorded as
administrative expenses in 2003 have been reclassified as cost of sales.
The preliminary financial statements for the year ended 31 December 2004 were
approved by the Board on 21 February 2005.
2. TURNOVER AND SEGMENTAL INFORMATION
Unaudited
2004 2003
#'000 #'000
Turnover by geographical destination was as follows:
United Kingdom 5,177 5,177
Rest of Europe 23,540 23,349
USA 23,624 26,636
Rest of North America 6,707 5,919
Rest of the World 3,642 3,297
---- ----
Total continuing operations 62,690 64,378
---- ----
3. OPERATING PROFIT/(LOSS)
Unaudited
This is stated after charging/(crediting): 2004 2003
#'000 #'000
Auditors' remuneration - audit services 190 189
Auditors' remuneration - other services 88 87
Research and development expenditure 2,538 2,642
Depreciation of owned assets 1,085 1,281
Depreciation of leased assets 6 134
Amortisation of intangible fixed assets 770 784
Amortisation of goodwill 4,086 4,125
Operating lease rentals for plant and machinery 123 216
Operating lease rentals for land and buildings 2,608 2,625
Increase in/(release of) provision for NIC on Share Option Scheme 7 (9)
4. TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITES
Unaudited
2004 2003
#'000 #'000
Current Taxation
UK corporation tax charge/(credit)
Current tax on income for the period 577 180
Adjustments in respect of prior periods (42) (85)
_________ _________
535 95
Overseas tax charge/(credit)
Current tax on income for the period 994 1,169
Adjustments in respect of prior periods (94) 152
_________ _________
900 1,321
_________ _________
Total Current Taxation 1,435 1,416
_________ _________
Deferred Taxation
Current period 374 79
Adjustments in respect of prior periods (374) (511)
_________ _________
Total Deferred Taxation - (432)
_________ _________
Tax on profit/(loss) on ordinary activities 1,435 984
----- -----
5. LOSS PER ORDINARY SHARE
Unaudited
2004 2003
#'000 #'000
Loss for the period (978) (1,788)
Weighted average number of shares in the year: No. No.
Basic 55,192,501 54,133,105
Diluted 57,714,260 56,847,906
Basic loss per share (1.77p) (3.30p)
Diluted loss per share (1.77p) (3.30p)
Adjusted diluted earnings per share 6.72p 5.49p
6. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
Share Shares to be Profit &
Issued
Share Premium Loss
Capital Account Account Total
#'000
#'000 #'000 #'000 #'000
At 1 January 2003 541 43,549 - (9,071) 35,019
Arising on share issues 1 38 - - 39
Fees relating to placement - (18) - - (18)
Shares to be issued - - 316 - 316
Retained loss for the year - - - (1,788) (1,788)
Currency difference on translation of
net assets of subsidiary undertakings - - - 278 278
------------- ----------- ---------- ---------- --------
At 31 December 2003 542 43,569 316 (10,581) 33,846
Arising on share issues 19 596 (103) - 512
Retained loss for the year - - - (978) (978)
Currency difference on translation of
net assets of subsidiary undertakings - - - 532 532
------------- ----------- ---------- ---------- --------
At 31 December 2004 561 44,165 213 (11,027) 33,912
------------- ----------- ---------- ---------- --------
7. NOTES TO STATEMENT OF CASH FLOWS
(a) Reconciliation of operating loss to net cash
inflow from operating activities:
Unaudited
2004 2003
#'000 #'000
Operating profit/(loss) 359 (648)
Depreciation 1,085 1,415
Amortisation of goodwill and intangible assets 4,856 4,909
Loss on disposal of tangible fixed assets 2 57
Increase in debtors (626) (1,794)
(Decrease)/increase in creditors and provisions (166) 231
Exchange differences 406 300
_______ _______
Net cash inflow from operating activities 5,916 4,470
---- ----
(b) Reconciliation of net cash flow to movement in net funds:
Unaudited
2004 2003
#'000 #'000
Increase in cash 4,192 651
Cash outflow from decrease in debt financing 67 1,994
----- -----
Change in net funds resulting from cash flows 4,259 2,645
Translation difference (30) (22)
----- -----
Change in net funds 4,229 2,623
Net funds at start of year 7,223 4,600
----- -----
Net funds at end of year 11,452 7,223
----- -----
(c ) Analysis of net funds:
Finance Leases Cash Overdraft Loan Notes Total
#'000 #'000 #'000 #'000 #'000
At 1 January 2003 (589) 6,721 (221) (1,311) 4,600
Movement on exchange (22) 137 7 (144) (22)
Cash flow 557 437 214 1,437 2,645
-------- -------- -------- -------- --------
At 31 December 2003 (54) 7,295 - (18) 7,223
Movement on exchange 4 (35) - 1 (30)
Cash flow 50 4,192 - 17 4,259
-------- -------- -------- -------- --------
At 31 December 2004 - 11,452 - - 11,452
----- ---- ---- ---- ----
8. PROVISIONS FOR LIABILITIES AND CHARGES
At 31 December 2004 #0.5m was held as a provision in respect of onerous lease
commitments.
9. DIVIDEND
No dividend was paid and no dividend is proposed in respect of the year-ended 31
December 2004.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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