RNS Number:5818I
SDL PLC
16 August 2001
For Immediate Release 16 August 2001
SDL plc
Interim Results
For the Six Months Ended 30 June 2001
SDL plc ("SDL" or "the Group"), the globalization products and solutions
company, is pleased to announce its results for the six months to 30 June
2001.
Operational Highlights:
* Turnover up 45% at # 16.75m
* EBITDA loss of #1.02m through development and integration costs of
new technology
* Net cash resources of # 11.14m
* Successful integration into the Group of the TranscendRT(TM) real-time
translation and Sykes Inc. localization acquisitions
* Launch of SDLX(TM) 4.0 combining computer aided and real-time
translation
* Launch of SDLWebFlow(TM) 3.0, the first multilingual content
management system featuring real-time translation
* New product related partnerships with ICL and Gauss
* Product sales to Organic, Bank of Canada, MSDW and Belga
Commenting on the results Mark Lancaster, Chairman and Chief Executive of SDL
said:
"The strong results in the face of difficult market conditions in all the key
international software markets fully endorse SDL's strategy of providing cash
generative localization services along with software developments. The SDL
product offer has progressed substantially with the acquisition and
integration of the real-time translation technology and we are delighted with
the response we have had so far from existing and potential clients. Since
flotation, SDL has developed in to a significantly larger and more global
company, with SDL Globalware software being at the cutting edge of
globalization technology. Despite the prevailing market conditions SDL is
consolidating its position as the world's leading globalization software and
services business".
For further information, please contact:
Mark Lancaster / Alastair Gordon
Tel: 01628 410127
SDL
J.P Burgun
Tel: 020 7628 1114
ICIS
Chairman's Statement
SDL has performed well in the first half of 2001 with revenues of #16.75m, an
increase of 45% over the corresponding period in 2000. This is despite the
generally difficult trading conditions in the sector and the US economic
slowdown. More importantly SDL has controlled costs, keeping the business
stable with low cash burn rates, whilst continuing investment in technology
and the development of software products. The Group's cash resources were #
11.14m as at 30 June 2001. SDL has managed to achieve this performance by
increasing revenues derived from its blue chip customer base such as Oracle,
Sun Microsystems and Lexmark whilst adding new sector customers such as CR
Lawrence and Teleroute, both of the latter being product based solutions. The
Group has added to its product and solutions offerings through both internal
development and acquisitions while maintaining its pre-eminent position in the
service sector of the globalization market.
Strategic Overview
Although the current economic downturn has slowed the speed of product
adoption for the whole IT industry, the Group's strategy of providing both
services and products has given it the stability to continue to invest its
profits from the service side of the business into its long term product
strategy.
As global connectivity continues to grow this will require more efficient
translation from one language to another, whether this medium be the intranet,
email, web or more traditional documentation. The range of SDL's product
offerings now covers the complete spectrum of needs for translation from
technical translation requiring quality human translation through to instant
machine translation where the recipient only needs to ascertain the "gist" of
the message.
This approach to providing full solutions of both product and service
offerings continues to be unique in the industry. The move to a more complete
solution for globally based industries is expected to become a major trend in
global industry, involving a mix of both machine-related techniques and human
translation. SDL believes that the combination of human translation with
knowledge-based translation systems and real-time (or machine) translation
with customised dictionaries gives a powerful solution to the customers'
requirements.
Operational Overview
Product Development
The Group began the year with SDLWebFlow(TM) and its industry-leading suite of
localization tools SDLX(TM), HELPQA, HTMLQA and ToolProof. To this impressive
array of translation memory and workflow related products SDL has now added
TranscendRT(TM), a real-time translation engine which has been successfully
integrated into our product range.
In May the Group announced the launch of SDLX(TM) 4.0, providing a combined
computer aided translation and real-time translation solution. SDLX(TM) is now
being adopted by new sector customers such as Air Canada and Bank of Canada
and has seen a significant migration of existing customers to the new product.
This was followed in June by the announcement of SDLWebFlow(TM) 3.0, effectively
the first multilingual content management system that also features real-time
translation. The pairing of real-time translation with SDLWebFlow(TM's) existing
translation functionality gives globally orientated companies a faster and
more reliable multilingual content management solution.
Integration of Acquisitions
With the continuing consolidation in the industry, SDL is constantly
appraising investment opportunities that will fit with its solutions based
strategy and enhance the Group's globalization offering. This resulted in two
acquisitions in the first half of 2001, the localization business and assets
of Sykes Enterprises Inc for $0.6m in January and the TranscendRT(TM) business
and technology from Transparent Language Inc for $9.0m in February.
The acquisition of the Sykes localization business has given the Group an
important production presence in the USA, securing business that would not
otherwise be available to the Group, and a multi-lingual capacity in Belgium.
Both locations have been successfully introduced to SDL's processes and
controls and are making a useful revenue contribution. It was anticipated at
the time of the acquisition that there would be a cost to this integration and
that they would be loss making for a 6-12 month period.
The assets acquired by the Group in the Transparent Language Inc. transaction
included the intellectual property rights to the TranscendRT(TM) machine
translation technology and related products, including the Enterprise
Translation Server, which provide instant language translation of e-mail, web
pages and documents. The rapid integration of this technology into the Group's
existing product base is documented in the product development section. The
acquisition also enhanced SDL's world-wide product sales and marketing team.
Financial Overview
Results
Revenues for the 6 months ended 30 June 2001 were #16.75m, a 45% increase on
the first six months of 2000. The revenue from the Group's existing business
prior to acquisitions was #14.93m, an increase of 29% over the prior year,
with the acquired businesses contributing #1.82m. The strength of SDL's
existing client base helped it maintain growth in a period when new
globalization solutions business was difficult to win. In the period to June
2001 85% of the business won was from existing clients against 65% in the
prior year.
Within the #16.75m revenues in the period, #0.61m related to product solutions
and the localization services generated by them. In the same period in 2000
the equivalent figure was #1.63m, but #1.15m of this was represented by one
large one-off contract.
The gross margin achieved in the period amounted to 46% (2000 - 46%). Within
the gross margin figures, including the prior periods, the Group has amended
its accounting policy to include all direct and overhead costs relating to
development expenditure below the line within overheads.
The level of development costs, including direct costs and overheads,
increased to #1.49m (2000 - #0.70m) in the period as resources were applied to
the continued development of SDLWebFlow(TM) and the development and integration
of the real-time translation acquisition. The Board anticipates that these
levels of development expenditure will be maintained through the rest of the
financial year and into 2002 but will constantly monitor them in the light of
market conditions and product take up.
The operating loss prior to amortisation and development costs was #0.05m
against a profit of #1.10m in 2000. The operating loss for the six months to
30 June 2001 was #3.04m (2000 - operating profit of #46,000). Both periods
reflect the Group's policy of amortising goodwill and intangible assets over 8
years and the amortisation charge for 2001, totalling # 1.51m (2000 - #0.34m),
is increased by the effect of the acquisition of the Automated Real Time
Translation Division from Transparent Language Inc. in February 2001.
The loss per share for the period was 6.50p (2000 - profit per share of
0.10p), with a diluted loss per share of 6.50p (2000 - profit per share of
0.09p). The undiluted loss per share for the period before amortisation and
NIC on employee share options was 2.51p (2000 - profit per share of 1.07p).
As at 30 June 2001, the Group had shareholder funds of #33.99m (2000 - #
31.06m) and net cash balances of #11.14m (2000 - #11.49m). The net cash
outflow from operating activities amounted to #107,000 (2000 - net cash inflow
of #204,000).
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 being retained
for the future development of the business.
Board Appointment and Resignations
John Matthews, age 56, was appointed as a Non Executive Director on 15 June
2001. John has been Chairman of Crest Nicholson plc since 1996 and is also
Chairman of Media Systems Group, a supplier of software, advertising and
booking systems to newspaper publishers. He also acts as an independent
director on the boards of three other listed companies.
Floyd Bradley resigned as a Non Executive Director on 10 May 2001 and has been
appointed to the newly created position of Executive Vice President Sales and
Marketing.
David Svendsen resigned as Non Executive Director on 28 March 2001.
Outlook
Trading since the half year has been in line with both expectations and the
immediately preceding months. While the continuing US and European economic
slowdowns affect most global markets, causing more projects to be deferred
than normal, we are also seeing other companies investing in localizing their
products and using e-business to reach their customers. Our technology fits
well with these emerging needs for effective real-time translation workflow
solutions and we are seeing more interest in real-time translation than
anticipated.
Our strategy for the past 3 years has been to invest in technology and
products that allow companies to go global more cost effectively and we are
continuing to invest in this technology. The Board believes that this
investment, although having an impact on profitability today, is necessary for
us to become the market leader in the coming years.
The technology is already being adopted by both large and small companies
giving them significant savings using products like SDLWebFlow(TM) and SDLX(TM).
Companies that have already adopted these systems are Morgan Stanley Dean
Witter, Bank of Canada and iPlanet. We are also adding to our existing
partnerships with Vignette and Interwoven with similar arrangements with ICL,
Gauss and Oracle.
Following our acquisition of Transparent's Real Time translation engine
earlier this year, we are progressing well in enhancing this technology and
integrating it with our existing technology to create the first
Knowledge-Based Translation System. The Real Time translation system
technology as it stands has been adopted by Lucent, EBSCO and CR Lawrence and
there are pilots in place with Sony and NCR and partnerships with Sybase and
Lotus/IBM.
SDL is a well-funded and well-managed business. Our stable and growing service
base, the rationalisation of our industry and our continued investment in
technology place us in a strong position in our market place.
Mark Lancaster
15 August 2001
Unaudited Consolidated Profit and Loss Account
for the six months ended 30 June 2001
6 6 Year to
months months 31
to to December
30 June 30 June 2000
notes 2001 2000
#'000 #'000 #'000
NET TURNOVER
Existing operations 14,931 11,578 29,730
Acquisitions 9 1,816 - -
Total continuing operations 3 16,747 11,578 29,730
OPERATING (LOSS)/ PROFIT
Total continuing operations before amortisation (1,534) 406 2,030
Amortisation of goodwill and intangible (1,507) (360) (1,512)
benefits
(LOSS)/ PROFIT ON ORDINARY ACTIVITIES BEFORE (3,041) 46 518
INTEREST AND TAXATION
Net interest receivable/(payable) and similar 271 223 541
charges
(LOSS)/ PROFIT ON ORDINARY (2,770) 269 1,059
ACTIVITIES BEFORE TAXATION
Tax on profit on ordinary activities 5 74 (235) (660)
(LOSS)/ PROFIT ON ORDINARY (2,696) 34 399
ACTIVITIES AFTER TAXATION
Minority interests - 7 -
(LOSS)/ PROFIT ATTRIBUTABLE TO SHAREHOLDERS (2,696) 41 399
Dividends - - -
RETAINED (LOSS)/ PROFIT FOR THE PERIOD (2,696) 41 399
Pence Pence Pence
Basic (loss)/earnings per share 6 (6.50) 0.10p 1.00
Diluted (loss)/earnings per share 6 (6.50) 0.09p 0.93
Unaudited Statement of Recognised Gains and 6 6 Year to
Losses months months 31
to to December
30 June 30 June 2000
notes 2001 2000
#'000 #'000 #'000
(Loss)/profit for the period (2,696) 41 399
Currency translation differences on foreign 8 (82) (84) (45)
currency net investments
Total gains and losses recognised in the period (2,778) (43) 354
Unnaudited Group Balance Sheet
at 30 June 2001
30 June 30 June 31
2001 2000 December
2000
notes #'000 #'000 #'000
FIXED ASSETS
Intangible Assets 21,170 17,447 16,601
Tangible Assets 2,207 1,778 2,003
Investments 82 44 23
23,459 19,269 18,627
CURRENT ASSETS
Debtors 5,200 6,086 6,418
Cash at bank and in hand 11,146 11,493 13,080
16,346 17,579 19,498
CREDITORS: amounts falling due within one
year
Other creditors (5,767) (5,751) (6467)
(5,767) (5,751) (6,467)
NET CURRENT ASSETS 10,579 11,828 13,031
TOTAL ASSETS LESS CURRENT LIABILITIES 34,038 31,097 31,658
PROVISIONS FOR LIABILITIES AND CHARGES (40) (57) (103)
33,998 31,040 31,555
CAPITAL AND RESERVES
Called up share capital 8 422 395 398
Share premium account 8 36,444 31,153 31,247
Profit and Loss Account 8 (2,868) (487) (90)
SHAREHOLDERS' FUNDS 8 33,998 31,061 31,555
Equity minority interests - (21) -
33,998 31,040 31,555
Equity interests 33,988 31,061 31,555
Non-equity interests - (21) -
33,988 31,040 31,555
The Interim Financial Information presented in this Interim Report was
approved by the Board of Directors on 15 August 2001
Unaudited Group Cash Flow Statement
for the six months ended 30 June 2001
6 months 6 months Year to
to to 31
30 June 30 June December
2001 2000 2000
notes #'000 #'000 #'000
NET CASH INFLOW/(OUTFLOW) FROM OPERATING (107) 204 2,414
ACTIVITIES
RETURN ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 285 238 564
Interest paid (13) (15) (22)
Finance lease Interest (1) - (1)
271 223 541
TAXATION
Overseas and UK tax (paid)/received (279) 11 (47)
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets (445) (333) (1,172)
Payments to acquire intangible fixed assets - (13) (90)
Receipts from sale of tangible fixed assets 2 - 20
(443) (346) (1,242)
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings 9 (1,439) (17,806) (14,951)
Net cash acquired with subsidiary - 560 (2,417)
undertakings
(1,439) (17,246) (17,368)
NET CASH OUTFLOW BEFORE FINANCING (1,997) (17,154) (15,702)
Proceeds from issue of ordinary share 65 21,319 21,461
capital
Purchase of Preference Shares - (32) (32)
Repayment of short term and long term loans - (380) (380)
Capital element of finance lease rental (2) - (7)
payments
63 20,907 21,042
(DECREASE)/INCREASE IN CASH IN THE PERIOD (1,934) 3,753 5,340
Unaudited Group Cash Flow Reconciliations
(a) Reconciliation of operating (loss)/profit to net cash inflow/(outflow)
from operating activities
6 months 6 months Year to
to to 31
30 June 30 June December
2001 2000 2000
#'000 #'000 #'000
Operating (loss)/profit (3,041) 46 518
Depreciation 511 285 845
Amortisation of goodwill and intangible assets 1,507 360 1,529
(Profit)/Loss on disposal of tangible fixed (2) - 20
assets
Decrease/(increase) in debtors 1,381 (3,550) (1,529)
Increase/(decrease) in creditors and (408) 3,063 1,130
provisions
Share of (profit)/loss of associate 10 (5)
Exchange gain on cash, liquid resources and (65) - (94)
loans
Net cash inflow/(outflow) from operating (107) 204 2,414
activities
b) Reconciliation of net cash flow to movement in net funds
6 months 6 months Year to
to to 31
30 June 30 June December
2001 2000 2000
#'000 #'000 #'000
(Decrease)/increase in cash (1,934) 3,753 5,340
Cash outflow from decrease in debt financing 2 380 387
Change in net funds resulting from cashflows (1,932) 4,133 5,727
Finance leases acquired with subsidiaries - - (18)
Movement in net funds (1,932) 4,133 5,709
Net funds at start of period 13,069 7,360 7,360
Net funds at end of period 11,137 11,493 13,069
c) Reconciliation of net funds to Balance Sheet
6 months to 6 months to Year to
30 June 30 June 31 December
2001 2000 2000
#'000 #'000 #'000
Cash at bank 11,146 11,493 13,080
Current borrowing - - -
Current net cash 11,146 11,493 13,080
Finance lease (9) - (11)
Net funds at end of period 11,137 11,493 13,069
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 2000.
2. Change in accounting presentation
Certain development costs, which were reported in cost of sales during 2000,
have now been transferred to overhead in accordance with group policy.
3. Turnover and segmental information
6 months 6 months Year to
to to 31
30 June 30 June December
2001 2000 2000
#'000 #'000 #'000
Globalization solution services 14,434 9,952 27,588
Globalization solution products and related 497 1,626 2,142
services
Continuing operations 14,931 11,578 29,730
Globalization solution services 1,703 - -
Globalization solution products and related services 113 - -
Acquisitions 1,816 - -
Total continuing operations 16,747 11,578 29,730
6 months to 6 months to Year to
30 June 30 June 31 December
2001 2000 2000
#'000 #'000 #'000
United Kingdom 1,674 1,812 4,229
Rest of Europe 2,383 2,947 5,783
United States of America 10,213 6,181 17,423
Rest of the World 661 638 2,295
Total existing operations 14,931 11,578 29,730
United Kingdom 183 - -
Rest of Europe 436 - -
United States of America 1,094 - -
Rest of the World 103 - -
Total acquisitions 1,816 - -
Total continuing operations 16,747 11,578 29,730
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 to 6 Year to
30 June months 31
2001 to December
#'000 30 June 2000
2000 #'000
#'000
Is stated after charging:
Research and development 1,487 695 1,610
expenditure
Depreciation of owned 511 285 845
assets
Amortisation of goodwill 1,507 360 1,529
and intangibles
Provision for NIC on (62) 21 67
Share Option Scheme
Restructuring and
reorganisation costs in
relation to acquisitions 70 108 108
5. Taxation
6 months 6 months Year to
to to 31
30 June 30 June December
2001 2000 2000
#'000 #'000 #'000
The tax (credit)/charge for the current period
comprised:
Foreign taxation 115 40 255
UK Corporation Tax (credit)/charge (212) 195 405
Prior year taxation:
Foreign taxation 23 - -
(74) 235 660
6. Earnings per share
6 months to 6 months to Year to
30 June 30 June 31 December
2001 2000 2000
m m m
Basic weighted average number of shares 41.4 39.4 39.5
Employee share options 2.4 3.7 3.6
Diluted weighted average number of shares 43.8 43.1 43.1
Note that where the effect of share options is anti-dilutive 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 Capital Share Premium Profit & Loss Total
#'000 #'000 #'000 #'000
At 31 December 2000 398 31,247 (90) 31,555
Shares issued 24 5,197 - 5,221
Loss for the period - - (2,696) (2,696)
Currency realignment - - (82) (82)
At 30 June 2001 422 36,444 (2,868) 33,998
9. Acquisitions
During the period, the Group made the following acquisitions:
- The assets of Sykes Enterprises Inc. localization business for a
cash consideration of US$556,000 on 22 January 2001; and
- The Automated Real Time Translation Division from Transparent
Language Inc. for a total consideration of US$9 million satisfied by the
payment of US$1.5m in cash and the issue of US$7.5 million in ordinary shares
at 1p each. The assets acquired by the Group on 13 February 2001 included the
intellectual property rights to Transparent's TranscendRT(TM) machine
translation technology and related products, including the Enterprise
Translation Server, which provide instant language translation of e-mail, web
pages and documents.
10. Results for 2000
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 2000 have been extracted from the 2000 Annual Report 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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