RNS Number:7490Y
SDL PLC
22 February 2006
22 February 2006
SDL PLC
Preliminary Results for the Year ended 31 December 2005
SDL plc ("SDL" or "the Group"), a leader in the emerging market for global
information management (GIM) solutions, is pleased to announce its unaudited
preliminary results for the year ended 31 December 2005.
2005 2004 %
#'000 #'000 Change
Income Statement:
Revenue 78,479 62,690 +25%
Profit before tax and amortisation of intangibles 7,169 5,202 +38%
Profit before tax 5,217 4,432 +18%
Earnings per ordinary share - basic (pence) 4.87 5.42 -10%
Adjusted earnings per ordinary share - basic (pence) 8.20 6.81 +20%
Balance Sheet:
Total equity 49,594 38,562 +29%
Cash and cash equivalents 6,976 11,452 -39%
Interest bearing loans and borrowings 19,092 - n/a
Operational Highlights:
* Successful integration of TRADOS acquisition ahead of schedule. TRADOS was
acquired in July 2005 for #35.0 million and leaves SDL well positioned to be
the leader in Global Information Management
* Gross margins increased from 41% in 2004 to 47% in 2005
* Significant 2005 new business wins - AMD, Best Buy, Chrysler Group,
Emerson, France Telecom, GSK, Honda, Le Meridien, Regus, Siemens Medical,
SMS Demag, TI and many more
Commenting on the preliminary results Mark Lancaster, Chairman and Chief
Executive of SDL, said:
"Our growth drivers remain compelling. International businesses are facing
burgeoning demand from both within their businesses and externally from
customers and other stakeholders, to provide multilingual content. It is clear
from our customers' experience that satisfying this demand generates
considerable value in terms of return on investment. Having made this initial
investment corporations then need cost effective and efficient software systems
and services, in order to maintain and improve this content on an ongoing basis.
"Following many years of investment and the recent acquisition of TRADOS, SDL is
ideally positioned to help businesses, large and small, to create real value
through effective Global Information Management. We therefore remain excited
about the future prospects for the business."
For further information please contact:
SDL plc On 22 February 2006 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 plc (London Stock Exchange: 'SDL') is a leader in the emerging market for
global information management (GIM) solutions that empower organizations to
accelerate the delivery of high-quality multilingual content to global markets.
Its enterprise software and services integrate with existing business systems to
manage global information from authoring to publication and throughout the
distributed localization supply chain.
Global industry leaders such as Audi, Bayer, Best Western, Bosch, Canon,
Deutsche Bank, Kodak, Microsoft, Morgan Stanley, Reuters, and SAP rely on SDL to
provide enterprise software or full outsourcing for their GIM processes. SDL has
implemented more than 100 enterprise GIM solutions, has over 100,000 software
licenses deployed across the GIM ecosystem and its global services
infrastructure spans more than 50 offices in 30 countries.
Attached: Chairman's statement
Unaudited Consolidated Income Statement
Unaudited Consolidated Balance Sheet
Unaudited Consolidated Cash Flow Statement
Notes to the unaudited Financial Statements
CHAIRMAN'S STATEMENT
Summary Performance
2005 has been a year of significant strategic development for SDL and strong
financial performance that exceeded market consensus expectations. Our
extensive portfolio of products and services now enables us to offer our
customers better value than ever before. This has already been proven as a
result of important wins with some of the world's leading companies, including
The Chrysler Group, GlaxoSmithKline, AMD, Honda and Emerson.
The successful integration of SDL and TRADOS has created a clear market leader
that now offers a complete Global Information Management (GIM) solution to the
market place. This is achieved through the combination of extensive multilingual
technology and worldwide service offerings, integrated across the company's
global footprint. The GIM solution enables companies to manage their
multilingual content across their entire global enterprise.
Our product and service solutions now appeal to a more senior level of decision
maker within target organisations, with recognition at board level that GIM is
an important factor in determining their company's future success. We have been
investing, and will continue to invest, in sales and marketing in order to
ensure that we are reaching these decision makers.
A number of our service customers have shown considerable interest in our
combined services/technology GIM solution. This has led to our divisions,
particularly in Belgium and Germany, proactively assisting customers to
understand the tangible value of SDL's GIM solutions, through seminars, webinars
and careful account management. This has resulted in additional sales to many
existing customers in the year, including Bosch, Homag, Linde, Philips and
Weidmuller.
This success has been reflected in the financial performance of the business in
2005. As indicated in our trading update in December 2005, the business has
performed ahead of market expectations and the Board is pleased to report
revenues of #78.5 million, up 25% on 2005 with TRADOS, acquired in July 2005,
contributing #9.2 million of revenues in the period, driving the operating
margins in the business to new levels. Profit before taxation and amortisation
increased by 38% to #7.2 million, while profit before taxation increased to #5.2
million (2004: #4.4 million).
The basic earnings per share, however, decreased by 10% as a result of an
increase in amortisation, following the acquisition of TRADOS, and a higher
effective tax rate.
Vision and Strategy for Global Information Management
SDL's investments and acquisitions over the last 5 years have resulted in the
company owning the technology framework required to effectively manage content
in a global business environment. This, combined with the worldwide office
infrastructure, positions SDL strongly to further execute its vision to maximise
value for our customers and shareholders.
The market has developed enormously in the past 18 months, as we now have over
100,000 desktop translation products in the market and our enterprise software
has exceeded 100 installations. The larger Language Service Providers are
adopting the server-based Translation Management software supplied by SDL to
leverage their translation solutions. The corporate market for enterprise
technology is moving from early adoption to that of broader market growth and
this is demonstrated by the fact that of the large scale new business won in
2005, 80% has incorporated an enterprise software component. There is now a
clear technology standard in the market place in the form of SDL TRADOS.
New Advances creating a Technology Ecosystem
We believe that with the continued importance of controlling and managing global
content in a multinational business, our GIM solution is instrumental. The main
differentiator between 2004 and 2005 is that our technology now covers the
complete supply chain ("ecosystem") for creating multilingual content seamlessly
and efficiently. Freelancers and smaller agencies are able to easily adopt the
desktop technology, with the comfort that they are able to integrate with the
enterprise technology of their corporate clients. This creates a seamless
ecosystem, allowing valuable upward compatibility and upgrade opportunity at
considerably less cost than has been afforded in the past. We consider this
technology ecosystem will be the catalyst for considerable market growth in the
future.
Our technology continues to be a key driver in the market, with our enterprise
technology becoming increasingly important to accelerate time to market, at
reduced cost. The SDL Knowledge-based Translation System ("SDL KbTS"), which
combines automated translation, translation memory and terminology technologies
with highly-skilled human resources to increase translation throughput, has
achieved the success that we predicted for its initial customers, and remains a
key strategic focus for SDL. Our customers have seen the time to market halved
and realised significant cost savings as a result of SDL KbTS managed projects.
2005 saw the following important product enhancements and innovations.
* SDL KbTS has now been installed and is returning significant benefits to
all of the pilot installations of 2004/2005, saving those customers on
average 40% in cost and reducing time to market by typically 50% or more.
2005 saw SDL KbTS deliver #2 million of revenues.
* SDL Translation Management System 2005 provides a framework for global
information management enabling organisations to deliver global information
faster, improve quality and consistency and achieve rapid
return-on-investment
* SDL PhraseFinder 2005 leverages patent-pending technology to quickly and
effectively identify terminology being used by an organisation
* SDL AuthorAssistant 2005 is innovative new technology that dramatically
advances the quality and efficiency of global authoring processes
Enterprise Software Customer Momentum
Global organisations are recognising the value of SDL's continued investment in
technology and services infrastructure. Significant contract wins include the
following:
* Significant success in the execution for the first pilot customers of SDL
KbTS, creating higher levels of quality, time to market improvements and
cost savings for its customers, including CNH, Best Western International,
and DaimlerChrysler
* Over 40 new installations of SDL Translation Management System, including
AMD, EBSCO, Le Meridien, Novell, McDonalds, Open Text, Plantronics, TI
* Growing momentum for SDL AuthorAssistant with customer wins at AGCO, Getty
Images and Oce
TRADOS Acquisition
The integration of SDL and TRADOS has progressed ahead of schedule, allowing us
to focus on our advanced new technology platform to manage multilingual content.
We have been able to take the best of both companies' technology to provide a
fully integrated suite of products from the desktop to the enterprise. This
ecosystem of technology modules enables our customers to create customised
solutions for their specific requirements.
In the latter part of 2006, and early 2007 we will be releasing our new platform
technology modules, taking multilingual asset management to new levels. We will
redefine the way companies currently work, through advanced translation asset
management, integrated to provide knowledge-based GIM. All of this is being
built on the Translation Memory, Terminology Management and Translation
Management data formats we have in the market place. This new platform will
provide our customers with 100% forward compatibility with the current ecosystem
that exists in the market place today.
The combination of TRADOS and SDL technologies and infrastructures has created
the scale required to deliver an enhanced business model for success. With an
annual investment of $8-10m into technology, the subsequent benefits derived by
our customers allow them accelerated delivery of their multilingual content into
the global market place.
Business Process Outsourcing and Longer Term Contracts through GIM
The introduction of GIM has considerably increased our ability to win longer
term contracts. There are also notable changes in the revenue mix, with a move
away from the traditional IT dominated sector to that of pharmaceutical,
automotive, manufacturing and financial services 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 and more recently by the business function
within the organisation. Most importantly the move by our clients towards
consolidating vendors and outsourcing more business processes has enabled them
to maximise efficiencies and brought us larger longer-term contracts with
companies such as Hewlett Packard, Microsoft, Philips, Kodak and CIBC.
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. 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 local language experts that utilise common SDL process and
systems, creating an integrated worldwide structure. This provides customers
with culturally sensitive translations in high volumes. Our continued investment
in low cost regions, such as Thailand, Poland and China, provides our customers
with skilled resources at low cost, thereby offsetting pricing pressure. All of
our 50 offices are integrated through our virtual private network, which is
administered through our central Empower Management Information System. The
above investments, coupled with technology, are now showing significant returns
as they start to deliver solid profits in a competitive market.
Market Leaders in Translation-on-Demand
Our online translation portals, FreeTranslation.com and Click2Translate.com,
have become valuable business channels for SDL. FreeTranslation.com, a portal
widely considered to be the market leader in instant translation handling over
2.5 million visitors per week, and Click2Translate.com, which provides paid for
translation services to a broad range of customers, have contributed #1 million
of high margin localisation business in 2005. The revenue from these portals is
set to increase significantly in 2006. These 'Translation-on-Demand' solutions
also provide our customers with a smooth upgrade path to our private Enterprise
Technology portals for ongoing high volume translation users.
Outlook
With the $2 billion - $3 billion high-end translation market only just starting
to evolve into broader business demand, 2006 will be a year of strong investment
as we promote GIM in vertical markets. We will be investing heavily in sales and
marketing to continue to spread the GIM message to the market. We will also be
investing in the technology division of the business, a proven and key
differentiator from our competitors and a significant value enhancer to our
customers that are managing global information across their enterprises.
We expect to see further important strategic opportunities emerge in 2006, as we
continue to penetrate new markets and larger corporations move towards more
efficient business process outsourcing. In the latter half of the year we also
expect to see the initial benefits of GIM delivery to the market place. The
tangible benefits from the new technology platform will provide sustained growth
momentum through the latter half of 2006 and 2007, at which time we anticipate
GIM to be firmly established and generating additional sales through Business
Process Outsourcing.
Our growth drivers remain compelling. International businesses are facing
burgeoning demand from both within their businesses and externally from
customers and other stakeholders, to provide multilingual content. It is clear
from our customers' experience that satisfying this demand generates
considerable value in terms of return on investment. Having made this initial
investment corporations then need cost effective and efficient software systems
and services, in order to maintain and improve this content on an ongoing basis.
Following many years of investment and the recent acquisition of TRADOS, SDL is
ideally positioned to help businesses, large and small, to create real value
through effective Global Information Management. We are excited about the
future prospects for the business.
Mark Lancaster
Chairman & Chief Executive
21 February 2006
SDL plc
UNAUDITED CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2005
Unaudited
Notes 2005 2004
#'000 #'000
Sale of goods 7,425 982
Rendering of services 71,054 61,708
REVENUE 78,479 62,690
Cost of sales (41,475) (36,840)
GROSS PROFIT 37,004 25,850
Non direct operating costs (29,288) (20,746)
OPERATING PROFIT BEFORE
AMORTISATION OF INTANGIBLE ASSETS 7,716 5,104
Amortisation of intangible assets (1,952) (770)
OPERATING PROFIT 2 5,764 4,334
Finance costs (761) (30)
Finance revenue 214 128
PROFIT BEFORE TAX 5,217 4,432
Tax expense 3 (2,358) (1,443)
PROFIT FOR THE PERIOD ATTRIBUTABLE
TO EQUITY HOLDERS OF THE PARENT 2,859 2,989
Earnings per ordinary share - basic (pence) 4 4.87 5.42
Earnings per ordinary share - diluted (pence) 4 4.68 5.19
Adjusted earnings per ordinary share - basic (pence) 4 8.20 6.81
Adjusted earnings per ordinary share - diluted (pence) 4 7.87 6.53
SDL plc
UNAUDITED CONSOLIDATED BALANCE SHEET
at 31 December 2005
Unaudited
Notes 2005 2004
#'000 #'000
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 2,746 2,631
Intangible assets 6 63,583 23,662
Deferred income tax 1,640 1,113
Rent deposits 353 217
68,322 27,623
CURRENT ASSETS
Trade and other receivables 18,995 13,019
Cash and cash equivalents 6,976 11,452
25,971 24,471
TOTAL ASSETS 94,293 52,094
CURRENT LIABILITIES
Trade and other payables (18,045) (10,989)
Interest bearing loans and borrowings 7 (2,000) -
Current tax liabilities (4,068) (1,917)
Provisions (500) (112)
(24,613) (13,018)
NON CURRENT LIABILITIES
Interest bearing loans and borrowings 7 (17,092) -
Deferred income tax (2,596) (78)
Provisions (398) (436)
(20,086) (514)
TOTAL LIABILITIES (44,699) (13,532)
NET ASSETS 49,594 38,562
EQUITY
Share capital 615 561
Share premium 50,629 44,165
Shares to be issued 238 213
Retained earnings (2,893) (6,909)
Foreign exchange difference 1,005 532
TOTAL EQUITY 49,594 38,562
SDL plc
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
at 31 December 2005
Share Shares Foreign
Share Premium to be Retained Exchange
Capital Account Issued Earnings Differences Total
#'000 #'000 #'000 #'000 #'000 #'000
1 January 2004 542 43,569 316 (10,164) - 34,263
Currency translation
differences on foreign
currency net investments - - - - 710 710
Currency translation
differences on foreign
currency equity loans
to foreign subsidiaries - - - - (178) (178)
Deferred income taxation on
share based payments - - - 129 - 129
Total income and expense for
the year recognised directly
in equity - - - 129 532 661
Net profit for the year - - - 2,989 - 2,989
Total income and expense
for the year - - - 3,118 532 3,650
Arising on share issues 19 596 (103) - - 512
Share based payments - - - 137 - 137
At 31 December 2004 561 44,165 213 (6,909) 532 38,562
Share Shares Foreign
Share Premium to be Retained Exchange
Capital Account Issued Earnings Differences Total
#'000 #'000 #'000 #'000 #'000 #'000
At 1 January 2005 561 44,165 213 (6,909) 532 38,562
Currency translation
differences on foreign
currency intangibles
and net investments - - - - (33) (33)
Currency translation
differences on foreign
currency equity
loans to foreign subsidiaries - - - - 506 506
Deferred income taxation on
share based payments - - - 418 - 418
Tax credit for share options - - - 464 - 464
Total income and expense for
the year recognised directly
in equity - - - 882 473 1,355
Net profit for the year - - - 2,859 - 2,859
Total income and expense
for the year - - - 3,741 473 4,214
Arising on share options and
Lomac deferred purchase
consideration 9 376 (108) - - 277
Arising on acquisition of
TRADOS 45 6,088 - - - 6,133
Lingua Franca deferred
purchase consideration - - 133 - 133
Share based payments - - - 275 - 275
At 31 December 2005 615 50,629 238 (2,893) 1,005 49,594
All amounts are attributable to equity holders of the parent.
SDL plc
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2005
Unaudited
Notes 2005 2004
#'000 #'000
PROFIT BEFORE TAX 5,217 4,432
Depreciation of property, plant and equipment 1,122 1,085
Amortisation of intangible assets 1,952 770
Finance costs 761 30
Finance revenue (214) (128)
Share based payments 275 137
Loss on disposal of tangible fixed assets 24 2
Increase in debtors (2,640) (626)
Increase/(decrease) in creditors and provisions 1,289 (167)
Exchange differences (123) 399
Income tax paid (1,956) (1,167)
NET CASH FLOWS FROM OPERATING
ACTIVITIES 5,707 4,767
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire tangible fixed assets (1,010) (1,064)
Receipts from sale of tangible fixed assets 201 69
Purchase of subsidiaries (30,328) (123)
Net cash acquired with subsidiaries 3,216 -
Interest received 214 128
NET CASH FLOWS FROM
INVESTING ACTIVITIES (27,707) (990)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issue of ordinary share capital 277 512
Repayment of interest bearing loans and borrowings (2,385) (17)
Capital element of finance lease rental payments - (50)
Proceeds from new loans 20,092 -
Interest paid (761) (30)
NET CASH FLOWS FROM FINANCING
ACTIVITIES 17,223 415
(DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS (4,777) 4,192
MOVEMENT IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the start of year 11,452 7,295
(Decrease)/increase in cash and cash equivalents 9 (4,777) 4,192
Effect of exchange rates on cash and cash equivalents 9 301 (35)
Net cash and cash equivalents at end of year 6,976 11,452
SDL plc
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
for the year ended 31 December 2005
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.
2 OTHER REVENUE AND EXPENSES
Group operating profit is stated after charging/(crediting):
Unaudited
2005 2004
#'000 #'000
Included in administrative expenses:
Auditors' remuneration - audit services 256 190
Auditors' remuneration - other services 149 88
Research and development expenditure 3,877 2,538
Depreciation of owned assets 1,122 1,079
Depreciation of leased assets - 6
Amortisation of intangible fixed assets 1,952 770
Operating lease rentals for plant and machinery 194 123
Operating lease rentals for land and buildings 3,229 2,608
Net foreign exchange differences (551) 411
Provision for NIC on Share Option Scheme - 7
IFRS 2 Share Based Payments 275 137
3 INCOME TAX
(a) Income tax on profit:
Unaudited
2005 2004
#'000 #'000
Current taxation
UK income tax charge/(credit)
Current tax on income for the period 1,255 585
Adjustments in respect of prior periods (200) (42)
Tax credit for share options taken to equity 464 -
1,519 543
Foreign tax
Current tax on income for the period 1,260 994
Adjustments in respect of prior periods (87) (94)
1,173 900
Total current taxation (see (b) below) 2,692 1,443
Deferred income taxation
Origination and reversal of temporary differences (752) 245
Adjustments in respect of prior periods - (374)
Deferred tax credit for share options taken to equity 418 129
Total deferred income tax (334) -
Tax expense 2,358 1,443
An aggregate tax credit in respect of share based compensation for current and
deferred taxation of #882,000 (2004: #129,000) has been recognised in equity in
the year
(b) Factors affecting current tax charge:
The tax assessed on the profit on ordinary activities for the year is higher
than the standard rate of income tax in the UK of 30% (2004: 30%). The
differences are reconciled below:
Unaudited
2005 2004
#'000 #'000
Profit on ordinary activities before tax 5,217 4,432
Profit on ordinary activities at standard rate of tax in the
UK 30% (2004: 30%) 1,565 1,330
Expenses not deductible for tax purposes 216 235
Non deductible amortisation of intangibles 365 231
Non taxable income (91) -
Adjustments in respect of previous years (287) (136)
Utilisation of tax losses brought forward (304) (430)
Current tax losses not available for offset 1,157 233
Effect of overseas tax rates (249) 27
Other (14) (47)
Tax expense (see (a) above) 2,358 1,443
4 EARNINGS PER SHARE
The calculation of basic earnings per ordinary share is based on a profit after
tax of #2,859,000 and 58,674,412 ordinary shares, being the weighted average
number of ordinary shares in issue during the period.
The diluted earnings per ordinary share is calculated by including in the
weighted average number of shares the dilutive effect of potential ordinary
shares related to committed share options. For 2005 the diluted ordinary shares
were based on 61,147,846 ordinary shares that included 2,473,434 potential
weighted number of options.
The following reflects the income and share data used in the basic, diluted and
adjusted earnings per share computations:
2005 2004
#'000 #'000
Net profit attributable to ordinary equity holders of the parent 2,859 2,989
Amortisation of intangible fixed assets 1,952 770
Adjusted net profit attributable to ordinary equity
holders of the parent 4,811 3,759
2005 2004
No. No.
Weighted average number of ordinary shares for basic
earnings per share 58,674,412 55,192,501
Effect of dilution resulting from share options 2,473,434 2,379,241
Weighted average number of ordinary shares adjusted
for the effect of dilution 61,147,846 57,571,742
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of the
financial statements.
5 BUSINESS COMBINATIONS
Acquisition of TRADOS Inc
On 7 July 2005 the Group acquired 100% of the share capital of TRADOS Inc, a
company based in the US.
The total cost of the combination comprised $50 million (#28.5 million) and the
issue of 4,542,957 ordinary shares in the Group with a fair value of $10 million
(#6.1 million). The acquisition value is #1.35 per share, being the published
price of the shares of SDL plc at the date of acquisition.
The fair value of the identifiable assets and liabilities of TRADOS Inc as at
the date of acquisition were:
Book value Fair value
to Group
#'000 #'000
Intangible assets 2,375 13,615
Property, plant and equipment 494 402
Cash and cash equivalents 3,203 3,203
Trade receivables 2,909 2,820
Other receivables 313 324
Trade payables (899) (899)
Loans (1,318) (1,385)
Other payables (5,537) (6,735)
Deferred tax - (2,743)
Net assets 1,540 8,602
Goodwill arising on acquisition 27,646
36,248
Discharged by: #'000
Shares issued at fair value 6,133
Costs associated with the acquisition settled in cash 1,639
Cash paid 28,476
Total cash paid 30,115
Total 36,248
Cash outflow on the acquisition:
Net cash and cash equivalents acquired with the subsidiary 3,203
Cash paid (30,115)
Net cash outflow (26,912)
From the date of acquisition TRADOS Inc has contributed #506,000 to the net
profit before tax of the Group. If the combination had taken place at the
beginning of the year, the profit before tax and amortisation of intangibles for
the Group would have been #6,480,000 and revenue from continuing operations
would have been #85,266,000. Included in the #23,027,000 of goodwill
recognised above are certain intangible assets that cannot be individually
separated and reliably measured from the acquiree due to their nature. These
items include customer loyalty and assembled workforce.
Acquisition of Lingua Franca
On 18 April 2005 the Group acquired the business of Lingua Franca, based in
Dubai. The total cost of the combination comprised cash of $400,000 (#213,000)
and 112,086 ordinary shares to be issued in the Group with a fair value of
$250,000 (#133,000). The acquisition value is #1.19 per share, being the
published price of the shares of SDL plc at the date of exchange. The fair
value of the identifiable assets and liabilities of Lingua Franca as at the date
of acquisition were:
Book value Fair value
to Group
#'000 #'000
Property, plant and equipment 16 16
Cash and cash equivalents 13 13
Trade receivables 13 13
Other receivables 21 21
Trade payables (3) (3)
Other payables (62) (62)
Loans (44) (44)
Net liabilities (46) (46)
Goodwill arising on acquisition 392
346
Discharged by: #'000
Shares issued at fair value 133
Cash paid 213
Total 346
Cash outflow on the acquisition:
Net cash and cash equivalents acquired with the subsidiary 13
Cash paid (213)
Net cash outflow (200)
From the date of acquisition Lingua Franca has contributed a loss of #28,000 to
the net profit of the Group. If the combination had taken place at the
beginning of the year, the profit before tax and intangible amortisation for the
Group would have been #7,207,000 and revenue from continuing operations would
have been #78,499,000. Included in the #392,000 of goodwill recognised above
are certain intangible assets that cannot be individually separated and reliably
measured from the acquiree due to their nature. These items include customer
loyalty and assembled workforce.
6 INTANGIBLE ASSETS
Intellectual
Property Goodwill Total
31 December 2004 #'000 #'000 #'000
Cost at 1 January 2004, net of accumulated
amortisation 3,877 20,546 24,423
Additions - 9 9
Amortisation (770) - (770)
At 31 December 2004 3,107 20,555 23,662
Intellectual Goodwill Total
Property
31 December 2005 #'000 #'000 #'000
Cost at 1 January 2005, net of accumulated amortisation 3,107 20,555 23,662
Acquisition of subsidiaries (Note 5) 13,615 28,038 41,653
Amortisation (1,952) - (1,952)
Currency adjustment 63 157 220
At 31 December 2005 14,833 48,750 63,583
At 1 January 2004
Cost 6,270 32,749 39,019
Accumulated amortisation and impairment (2,393) (12,203) (14,596)
Net carrying amount 3,877 20,546 24,423
At 1 January 2005
Cost 6,270 32,758 39,028
Accumulated amortisation and impairment (3,163) (12,203) (15,366)
Net carrying amount 3,107 20,555 23,662
At 31 December 2005
Cost 19,885 60,796 80,681
Accumulated amortisation and impairment (5,115) (12,203) (17,318)
Currency adjustment 63 157 220
Net carrying amount 14,833 48,750 63,583
Intellectual property is written off on a straight-line basis over its estimated
useful life of between 5 and 15 years. As from 1 January 2004, the date of
transition to IFRS, goodwill was no longer amortised but is now subject to
annual impairment testing. The group has not capitalised any development costs
in the year (2004: #nil).
7 INTEREST BEARING LOANS AND BORROWINGS
Unaudited
2005 2004
#'000 #'000
Current
Current instalments due on bank loans 2,000 -
Non-current
Non - current instalments due on bank loans 17,092 -
Bank loans comprise the following:
2005 2004
#'000 #'000
US$5,388,650 variable rate secured term loan 3,122 -
#10,900,000 variable rate secured term loan 10,900 -
US$8,750,000 variable rate secured revolving credit facility 5,070 -
19,092 -
Less current instalments due on bank loans (2,000) -
17,092 -
US$5,388,650 variable rate secured term loan and #10,900,000 variable rate
secured term loan
These loans are secured and combined are repayable in quarterly instalments of
#500,000 with a bullet payment of #4.5 million in December 2010. The loans bear
interest at LIBOR + 1.75%.
US$8,750,000 variable rate secured revolving credit facility
This loan is secured and is drawn down under an available 5-year term revolving
credit facility. Interest is charged at LIBOR + 1.875%. The loan is
repayable within 1 month of the balance sheet date but has been classified as
long term because the group expects to draw down under the 5 year revolving
credit facility available to it. This facility is unconditional.
The conditions precedent had been met at 31 December 2005.
8 SHARE-BASED PAYMENT PLANS
On 1 December 1999 the company adopted the SDL Share Option Scheme (1999). It
comprises two parts, namely the SDL Approved Share Option Scheme (1999)
("Approved Part") and the SDL Unapproved Share Option Scheme (1999) ("Unapproved
Part"). The Approved Part has been approved by the Board of the Inland Revenue
under the provisions of the Income and Corporation Taxes Act 1988. The
Unapproved Part has not been approved by the Inland Revenue and it is not
intended to apply for approval in respect of it.
The expense recognised for share-based payments in respect of employee services
received during the year to 31 December 2005 is #275,000 (2004: #137,000). The
table below sets out the number and weighted average exercise prices (WAEP) of,
and movements in, share options during the year.
Unaudited Unaudited
2005 2005 2004 2004
No. WAEP No. WAEP
Outstanding at the beginning of the year 3,786,433 #0.68 4,711,017 #0.48
Granted during the year 702,000 #1.19 860,000 #1.18
Forfeited during the year (20,417) #1.11 (50,000) #1.18
Exercised during the year (502,377) #0.53 (1,612,030) #0.33
Expired during the year (118,910) #3.90 (122,554) #0.97
Outstanding at the end of the year 3,846,729 #0.70 3,786,433 #0.68
Exercisable 2,400,891 #0.56 2,214,729 #0.44
The weighted average share price at the date of exercise for the options
exercised is #1.57 (2004: #1.38).
For the share options outstanding as at 31 December 2005, the weighted average
remaining contractual life is 1.42 years (2004: 1.53 years).
The fair value of equity settled share options granted is estimated as at the
date of grant using the Black Scholes model. The following table lists the
inputs to the model:
2005 2004
Weighted average exercise price (pence) 102 92
Expected volatility 70% 70%
Option life 5 years 5 years
Expected dividends 1% 1%
Risk-free interest rate 5% 5%
9 ADDITIONAL CASH FLOW INFORMATION
Analysis of group net debt:
1 January Cash Exchange 31 December
2005 flow differences 2005
#'000 #'000 #'000 #'000
Cash and cash equivalents 11,452 (4,777) 301 6,976
Loans - (19,092) - (19,092)
11,452 (23,869) 301 (12,116)
1 January Cash Exchange 31 December
2004 flow differences 2004
#'000 #'000 #'000 #'000
Cash and cash equivalents 7,295 4,192 (35) 11,452
Loans (18) 17 1 -
Finance leases (54) 50 4 -
7,223 4,259 (30) 11,452
This information is provided by RNS
The company news service from the London Stock Exchange
END
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