RNS Number:3235Q
SDL PLC
4 September 2000
SDL PLC INTERIM RESULTS
FOR THE SIX MONTHS TO 30TH JUNE 2000
SDL plc ("SDL International" or "the Group"), the globalisation products and
solutions company, is pleased to announce its results for the six months to
30th June 2000.
Highlights:
* Turnover up 93% to #11.6m (1999: #6.0m) with sales from existing operations
up over 63%
* Operating profits before depreciation and goodwill (EBITDA) of #691,000, an
increase of 146%
* Successful launch of SDLWebFlowTM ahead of schedule in February 2000
* Acquisition of ITP ("ITP" or "SDL Global Solutions") for #14.5m, and rights
issue raising #21m net in May 2000
* Since its acquisition, the SDL Global Solutions business has been turned
round from loss making to breakeven
* Acquisition of Translationcraft products and integration of ITP technology,
strengthening product solutions offering
* Strong growth in sales of SDLWebFlowTM and SDLXTM software, with an
increasing percentage of product and related service sales to overall
turnover of 14% (nil% during the same period in 1999)
* Net cash balances of #11.5m
* Earnings per share of 0.10p (1999 - loss of 0.53p)
* Appointment of Keith Mills as Technical Director with immediate effect
Commenting on the results Mark Lancaster, Chairman and Chief Executive of SDL
International, said:
"These excellent results reflect the successful strategy of having invested in
on-line multilingual content management software and service solutions over
the past three years. Since the launch of SDLWebFlowTM in February, we have
been delighted by our existing customers' response to the product and in the
interest generated from potential new customers. In addition, the turnaround
of the ITP business we bought in May this year has been faster than
anticipated and will provide a strong platform for growth."
"Our focus continues to be on businesses which have major international sales
strategies through the use of the Internet. We are seeing our traditional blue
chip clients increasingly entering this space and now have the resources to
service this increasing demand and the ability to provide a complete
globalization solution. With the solid earnings from the Services Division,
providing strong cash flow, combined with the continued investment in
software, product marketing and sales, the Directors remain confident that SDL
International is in an ideal position to continue to deliver strong growth
going forward."
For further information please contact:
Mark Lancaster Tel: 01628 410127
Chairman and Chief Executive, SDL International
Alastair Gordon Tel: 01628 410127
Finance Director, SDL International
Bobby Morse / Tariq Haq Tel: 020 7606 1244
Merlin Financial
Attached: Chairman's Statement
Unaudited consolidated Profit & Loss Account
Unaudited consolidated Balance Sheet
Cash Flow Statement
Notes to the Interim results
Chairman's Statement
Summary
The first half of the 2000 financial year has seen dramatic growth and changes
within SDL International as the Group has pursued its globalization solutions
strategy. These have ranged from the launch and continued development of
SDLWebFlowTM, the online multilingual content management software solution, to
the successful acquisition of SDL Global Solutions (Ireland) Limited (formerly
ITP Limited) and the related Rights Issue. The Group has subsequently
benefited from strong growth, both organically and through acquisition, and is
pleased to report an increase in revenues to #11.58m, up 93% when compared to
the corresponding 6 month period in 1999.
While the Group benefited from the flurry of 'dotcom' activity at the
beginning of the year, the majority of the growth in the period has been from
the further development of globalization strategies via the Internet combined
with increased globalization needs by established 'blue chip' organisations. A
significant element of this sales growth has been driven by the globalization
solutions offered by the Group prompted by the positive market response to the
SDLWebFlowTM product. This in turn has had a beneficial effect on the Service
Division of the business.
Strategic Overview
SDL International's strategy remains focused on generating growth from the
expansion in the use of the Internet as a means of accessing a global market.
It is the view of the Directors that the clear prerequisite needed to be
successful on the Internet is having new and ever changing content to
encourage continual re-visits, combined with interesting information to invite
e-commerce transactions and brand recognition. The Directors believe that to
have the maximum reach globally, Internet communications initiatives need to
be in the local language and culture of the target audience.
Having successfully launched the SDLWebFlowTM software in February, further
developed the translation memory software products, and having increased the
services business of SDL International both organically and through
acquisition, the Group is ideally positioned to benefit from the increased use
of the Internet by large blue chip companies as a vital communication tool.
This is being echoed by some of the medium and smaller sized companies who
recognise the importance of globalization and localisation in managing
multilingual content on their web sites, and who are subsequently committing
further financial resources to these evolving strategies. It is SDL
International's strategy to provide globalization and localisation solutions
for all sizes of businesses and the Group is already at an advanced stage of
developing appropriate products for such a target market.
Operational Overview
Product Development
With SDLWebFlowTM as a core product, the Group has dedicated significant
resources to broadening and enhancing the product offerings both to the
globalization market and to the localisation industry itself. This has been
achieved both by in-house software development and the acquisition of
technology and products from ITP and Translationcraft. The combination of
these complementary technologies and products has allowed the Group to
accelerate the development of SDLWebFlowTM, SDLXTM and partner products
providing a suite of productivity products allowing companies to increase
their global exposure more rapidly whilst reducing costs significantly.
Integration of Acquisitions
The main acquisition in the period was that of ITP Limited, subsequently
renamed SDL Global Solutions (Ireland) Limited, where SDL International
assumed control in mid May and the two businesses are being successfully
integrated. The main production unit in Bray, Ireland has been rationalised
into two focused divisions and the Group's processes and procedures are being
installed so that clients are now presented with a seamless service wherever
they are dealing directly with the Group.
Similarly, the sales forces in North America have been integrated and are now
providing a powerful combined presence in this key market. While the Group's
focus remains on the Boston, Dallas, and San Francisco areas, new offices have
been opened in Atlanta and Montreal and new markets are being assessed. In
Asia the offices in Beijing have been combined to give a complete service and
a similar strategy is planned for Japan where the SDL Global Solutions office
is proving to be of great value.
Since the acquisition, significant resources have been allocated to informing
the Group's existing and new client base of the capabilities and skills of the
enlarged business. This has proved successful in that the fall out of clients
since the acquisition has been negligible. On the contrary, because of the
increased resources in providing comprehensive solutions, the Group has
expanded its blue chip client base over the past few months. In addition, the
costs to date of rationalising the acquisition and restructuring the Group to
accommodate these changes has been less than originally forecast. Costs
incurred through 30 June 2000 amounted to approximately #108,000, though it
should be noted that further costs are anticipated as the integration process
is completed in the second half of the year.
Since the acquisition in May, SDL Global Solutions has been successfully
transformed from a loss making business over the last two years to the current
breakeven position. The acquisitions of ATR, the globalization business for
the Nordic market, and Aslan, a testing and engineering facility to the
software localisation market, in February and March respectively are also
proving beneficial to the Group and have contributed to profits since being
acquired.
Financial Overview
Results
Revenues for the 6 months ended 30 June 2000 were #11.58m, a 93% increase on
the first 6 months of 1999. The revenue from the Group's existing business
prior to acquisitions made in the period was #9.86m, an increase of 65% over
the prior year, with the acquired businesses contributing #1.72m. Within the
#11.58m revenues in the period, #1.63m related to product solutions and the
localisation services generated by them. While the contribution from the
existing customer base was up significantly reflecting the levels of repeat
business that the Group has always enjoyed, business from new customers also
increased. Included within this new customer business was a one off project
for a single customer totalling approximately #1.15m. This project was
completed in the period.
The gross margin achieved in the period amounted to 44% (year to 31 December
1999 - 44%, 6 months to 30 June 1999 - 44%). The level of development costs,
including direct costs and overheads, increased to #0.7m in the period as the
resources from the flotation in December 1999 were applied to the development
of SDLWebFlowTM. High levels of development costs will be maintained through
the rest of the financial year and next year.
The operating profit prior to goodwill and development costs was #1.1m against
#0.4m in 1999. The operating profit for the 6 months to 30 June 2000 was
#46,000 (operating loss of #152,000 in 1999). Both periods reflect the Group's
policy of amortising goodwill over 8 years and the goodwill charge for 2000 is
increased by the effect of the SDL Global Solutions acquisition in May 2000.
Following the issuance of UITF abstract 25 "National Insurance contributions
on share option gains" the Group has changed its accounting policy in relation
to its provision for National Insurance contributions on stock options. The
Group now makes provision for these contributions on a straight-line basis
over the vesting period of the options and as remeasured at each period end
thereafter until the options are exercised. As a consequence of this change,
the brought forward accumulated deficit has been credited with #160,000. The
charge in the six months to 30 June 2000 amounted to #21,000 (1999 - # Nil).
The Group has benefited in the six months to 30 June 2000 by the net funds
raised in the flotation in December 1999 and from the Rights Issue in May
2000. Net interest receivable in the six month period was #223,000 (1999 -
interest payable of #11,000).
The earnings per share for the period was 0.10p (1999 - loss per share of
0.53p), with a diluted earnings per share of 0.09p (1999 - loss per share of
0.53p). The undiluted earnings per share for the period before goodwill and
NIC on employee share options was 1.07p (1999 - profit per share of 0.08p).
As at 30 June 2000, the Group had shareholder funds of #31.06m (1999 - #3.72m)
and net cash balances of #11.49m (1999 - #0.97m). The net cash flow from
operating activities amounted to #204,000 (1999 - #385,000). The cash flow
generated by the operating activities has enabled the Group to hold the 'burn
rate' of its cash resources over the period despite the investment in
technology and product development.
Dividend
The Directors have not recommended the payment of a dividend at this stage in
the Group's development. The Group's financial resources are to be retained
for the future development of the business.
Board Appointment
Keith Mills, age 39, has been appointed as Technical Director with immediate
effect. Mr Mills joined SDL International in 1994 and previously held senior
positions with Lotus Corporation, where he specialised in the process of
software localisation before moving to Ashton-Tate to the international
software engineering group. Mr Mills is responsible for all aspects of SDL
International's technical development and resources.
Outlook
We expect to see sustained revenue growth for the latter part of the year. We
will continue our strategy of increasing the Group's focus on software product
development and marketing, and hence we expect additional development and
marketing costs to be incurred in the second half of the year. We are now
seeing larger multinational companies realise the potential of the Internet
and adopt strategies to take advantage of the global opportunities it offers.
This represents the opening of a window of opportunity to market and sell our
products to a broader market and, in keeping with the pace of development, we
will continue to provide adequate resource to manage the considerable growth
opportunities.
Unaudited consolidated Profit & Loss Account
6 months 6 months Restated
to to Year
notes 30 June 30 June 31
2000 1999 December
1999
#'000 #'000 #'000
NET TURNOVER
Existing operations 9,860 5,984 12,960
Acquisitions 9 1,718 - -
Total continuing operations 3 11,578 5,984 12,960
OPERATING PROFIT/(LOSS)
Total continuing operations before
goodwill amortisation 406 51 (271)
Amortisation of goodwill (360) (203) (290)
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE
INTEREST AND TAXATION 46 (152) (561)
Net interest receivable/(payable)
and similar charges 223 (11) 11
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE
TAXATION 269 (163) (550)
Tax on profit on ordinary activities 5 (235) (12) (52)
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES AFTER TAXATION 34 (175) (602)
Minority interests 7 - -
PROFIT/(LOSS)
ATTRIBUTABLE TO
SHAREHOLDERS 41 (175) (602)
Dividends - - -
RETAINED PROFIT/(LOSS)
FOR THE PERIOD 41 (175) (602)
Pence Pence Pence
Basic earnings (loss) per share 6 0.10 (0.53) (2.08)
Diluted earnings (loss) per share 6 0.09 (0.53) (2.08)
Unaudited Statement of 6 months 6 months Restated
Recognised Gains and Losses to to Year
notes 30 June 30 June 31
2000 1999 December
1999
#'000 #'000 #'000
Profit/(loss) for the period 41 (175) (602)
Currency translation differences 8
on foreign currency net
investments (84) - -
Total recognised losses in the
period (43) (175) (602)
Unaudited Consolidated Balance Sheet
6 months 6 months Restated
to to Year
notes 30 June 30 June 31
2000 1999 December
1999
#'000 #'000 #'000
FIXED ASSETS
Intangible Assets: Goodwill 17,447 1,127 1,044
Tangible Assets 1,778 1,006 1,006
Investments 44 - 12
19,269 2,133 2,062
CURRENT ASSETS
Debtors 6,086 1,873 2,536
Cash at bank and in hand 11,493 1,636 7,826
17,579 3,509 10,362
CREDITORS: amounts falling due
within one year
Borrowings - (337) (212)
Other creditors (5,751) (1,256) (2,421)
(5,751) (1,593) (2,633)
NET CURRENT ASSETS 11,828 1,916 7,729
TOTAL ASSETS LESS CURRENT
LIABILITIES 31,097 4,049 9,791
CREDITORS: amounts falling due
after more than one year - (328) (254)
PROVISIONS FOR LIABILITIES
AND CHARGES (57) - (36)
31,040 3,721 9,501
CAPITAL AND RESERVES
Called up share capital 8 395 49 369
Share premium account 8 31,153 3,379 9,576
Profit and Loss Account 8 (487) 293 (444)
SHAREHOLDERS' FUNDS 8 31,061 3,721 9,501
Equity minority interests (21) - -
31,040 3,721 9,501
Equity interests 31,061 3,672 9,469
Non-equity interests (21) 49 32
31,040 3,721 9,501
Unaudited Group Cash Flow statement
6 months 6 months Year to
to to 31
notes 30 June 30 June December
2000 1999 1999
#'000 #'000 #'000
NET CASH INFLOW FROM
OPERATING ACTIVITIES 204 385 937
RETURN ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 238 18 64
Interest paid (15) (29) (53)
223 (11) 11
TAXATION
Overseas and UK tax (paid)/received 11 - (106)
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
Payments to acquire tangible fixed
assets (333) (163) (540)
Payments to acquire investments (13) - (12)
Receipts from sale of tangible fixed
assets - 9 77
(346) (154) (475)
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings 9 (17,806) - -
Net cash acquired with subsidiary
undertakings 560 - -
(17,246) - -
NET CASH INFLOW/(OUTFLOW)
BEFORE FINANCING (17,154) 220 367
Proceeds from issue of ordinary share
capital 22,024 900 7,963
Flotation charges - - (529)
Rights issue charges (705) - -
Repayment of short term and long
term loans (380) (119) (237)
Purchase of own shares (32) (300) (592)
Capital element of finance lease rental
payments - (21) (21)
20,907 460 6,584
INCREASE IN CASH IN THE PERIOD 3,753 680 6,951
Unaudited Cash Flow Reconciliations
6 months 6 months Restated
to to Year
notes 30 June 30 June 31
2000 1999 December
1999
#'000 #'000 #'000
(a) Reconciliation of operating
profit/(loss)to net cash inflow
from operating activities
Operating profit/(loss) 46 (152) (561)
Depreciation 285 230 542
Amortisation of goodwill 360 203 290
(Profit) on disposal of tangible fixed
assets - (2) (5)
Decrease/(increase) in debtors (3,550) 223 (407)
Increase/(decrease) in creditors and
provisions 3,063 (117) 1,078
Net cash inflow from operating
activities 204 385 937
(b) Reconciliation of net cash flow
to movement in net funds
Increase in cash 3,753 680 6,951
Cash outflow from decrease in debt
financing 380 140 258
Movement in net funds 4,133 820 7,209
Net funds at start of period 7,360 151 151
Net funds at end of period 11,493 971 7,360
(c) Reconciliation of net funds to
Balance Sheet
Cash at bank 11,493 1,636 7,826
Current borrowing - (167) (86)
Current net cash 11,493 1,469 7,740
Long term debt - (498) (380)
Net funds at end of period 11,493 971 7,360
1. Basis of preparation
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's financial statements for the year
ended 31 December 1999, except for the change in accounting policy in relation
to the provision for National Insurance contributions on share options
detailed in Note 2.
2. Change in accounting policy
Prior to the 6 months to 30 June 2000, full provision was made for National
Insurance liabilities that were expected to crystallise upon the exercise of
share options granted under unapproved schemes on or after 6 April 1999.
Following the issuance of UITF abstract 25 "National Insurance contributions
on share option gains" the Group has changed its accounting policy and now
makes provision for the National Insurance contributions on a straight-line
basis over the vesting period of the options and as remeasured each period
thereafter until the options are exercised. This change in accounting policy
has been effected through a prior period adjustment as follows:
Restated
30 June 31 December
1999 1999
#'000 #'000
Equity and non-equity shareholders' funds (as
previously reported) 3,721 9,341
Prior period adjustment - 160
Equity and non-equity shareholders' funds (as
restated) 3,721 9,501
3. Turnover and segmental information
6 months 6 months Restated
to to Year to
30 June 30 June 31
2000 1999 December
1999
#'000 #'000 #'000
Globalization solution services 9,952 5,984 12,960
Globalization solution products and
related services 1,626 - -
Continuing operations 11,578 5,984 12,960
6 months 6 months Restated
to to Year to
30 June 30 June 31
2000 1999 December
1999
#'000 #'000 #'000
United Kingdom 1,812 1,544 3,539
Rest of Europe 2,947 1,264 2,149
United States of America 6,181 3,158 7,169
Rest of the World 638 18 103
Total 11,578 5,984 12,960
Further analysis of turnover, profit and net assets by geographical segment is
not disclosed because the directors consider such disclosure would be
prejudicial to the business.
The turnover on the face of the profit and loss account has been analysed
between the existing operations and the acquisitions during the period.
However, due to the ongoing integration of the businesses it is not possible
to give a meaningful split between existing operations and the acquisitions as
relates to the operating profit.
4. Operating profit/(loss)
6 months 6 months Restated
to to Year to
30 June 30 June 31
2000 1999 December
1999
#'000 #'000 #'000
Is stated after charging:
Research and development
expenditure 695 350 847
Depreciation of owned assets 285 230 542
Amortisation of goodwill 360 203 290
Provision for NIC on Share Option Scheme 21 - 36
Restructuring and reorganisation costs
in relation to acquisitions 108 - -
5. Taxation
6 months 6 months Restated
to to Year to
30 June 30 June 31
2000 1999 December
1999
#'000 #'000 #'000
The tax charge for the current period
comprised:
Foreign taxation 40 - -
UK Corporation Tax charge 195 12 52
235 12 52
6. Earnings per share
6 months 6 months Restated
to to Year to
30 June 30 June 31
2000 1999 December
1999
m m m
Basic weighted average number of
shares 39.4 33.0 28.9
Employee share options 3.7 3.4 3.7
Diluted weighted average number of
shares 43.1 36.4 32.6
Note that where the effect of share options is antidilutive the diluted
earnings per share will be the same as the basic.
7. Foreign currency translation
The results of subsidiary companies reporting in currencies other than GB
Pound sterling have been translated at the average rate prevailing for each
month of the 6 months.
8. Equity shareholders' funds
Share Share Profit & Total
Capital Premium Loss
#'000 #'000 #'000 #'000
At 31 December 1999 369 9,576 (444) 9,501
Shares issued 26 21,577 - 21,603
Profit for the period - - 41 41
Currency realignment - - (84) (84)
At 30 June 2000 395 31,153 (487) 31,061
9. Acquisitions
During the period, the Group made the following acquisitions:
- ATR Information AB, a Swedish globalization company, purchased on 21
February 2000 for consideration equivalent to #335,000 satisfied partly in
cash and partly in shares;
- Aslan Localisation Services Limited, an Irish Localisation Engineering and
Testing company, purchased on 7 March 2000 for a consideration equivalent to
#209,000 satisfied partly in cash and partly in shares;
- SDL Global Solutions (Ireland ) Limited (formerly International Translation
and Publishing Limited), a Dublin based company providing a range of
globalization services, purchased on 16 May 2000 for a consideration
equivalent to #14.25m satisfied in cash.
Since 30 June 2000, the Group has acquired Translationcraft, a product
technology business on 26 July.
10. Results for 1999
The accounts in this statement do not comprise full accounts within the
meaning of section 240 of the Companies Act 1985. The figures for the year
ended 31 December 1999 have been extracted from the 1999 Annual Report after
taking into account the change in accounting policy as set out in Note 2 but
do not comprise statutory accounts for that period. The audited financial
statements have been delivered to the Registrar of Companies. The Auditors
made an unqualified report on those accounts and their report did not contain
any statement under section 237(2) or (3) of the Companies Act 1985.
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