RNS Number:4022I
SDL PLC
04 September 2006
4 September 2006
SDL PLC
Interim Results for the six months ended 30 June 2006
Revenue up 34% and adjusted EPS up 45%
SDL plc ("SDL" or "the Group"), the world's leading provider of global
information management (GIM) solutions, is pleased to announce its unaudited
interim results for the six months ended 30 June 2006.
Financial Highlights:
Unaudited Unaudited
6 months to 6 months to
30 June 30 June
2006 2005 %
#'000 #'000 Change
Income Statement:
Revenue 45,566 34,080 +34%
Earnings before interest, taxation, depreciation and
amortisation of intangibles (EBITDA) 6,163 3,848 +60%
Profit before tax and amortisation of intangible assets 5,070 3,489 +45%
Profit before tax 3,627 3,103 +17%
Earnings per ordinary share - basic (pence) 3.32 3.21 +3%
Adjusted earnings per ordinary share - basic (pence) 5.65 3.90 +45%
Balance Sheet:
Total equity 51,609 40,324
Cash and cash equivalents 6,157 12,950
Interest bearing loans and borrowings relating to
the acquisition of Trados Inc (16,605) -
Operational Highlights:
* Record revenue and profits, ahead of market expectations
* New enterprise customer agreements with AGCO, Dell and FedEx
* Desktop software market share increased to over 90% of translation
industries' professionals, with over 130,000 installations
* Successful integration of Trados
* Knowledge-based Translation Solution customer wins include HP, Computer
Associates and Microsoft
Mark Lancaster, Chief Executive and Chairman, said:
"The first half of the year has seen strong growth for SDL. The integration of
Trados and its technology into SDL has already proved successful in delivering
Global Information Management solutions for major global corporations, as well
as leading to a considerable improvement in gross margins for the group.
We expect to see continued strong financial returns from our investment in
Global Information Management, both from the services and the technology sides
of the business. We anticipate that the adoption of enterprise technology will
increase as we introduce new platform technologies into the market place and the
larger corporations continue to evolve their global content strategies. The
understanding and awareness of Global Information Management continues to be the
number one challenge to the growth of our business. However both our research
and that of third parties emphasises that Global Information Management is
becoming increasingly important as corporations continue to globalize.
Accordingly we expect the company to show continued growth in both profits and
revenue."
For further information please contact:
SDL plc On 4 September 2006 tel: 020 7831 3113
Mark Lancaster, Chief Executive Thereafter tel: 01628 410 127
Financial Dynamics Tel: 020 7831 3113
Edward Bridges/Juliet Clarke
Background information
About SDL plc:
SDL International (London Stock Exchange: 'SDL') is the leader in 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 rely on SDL to provide enterprise software or hosted
services for their GIM processes, including Audi, Bayer, Best Western, Bosch,
Canon, Deutsche Bank, Kodak, Microsoft, Morgan Stanley, Reuters and SAP. SDL has
implemented more than 150 enterprise GIM solutions, has deployed over 130,000
software licenses across the GIM ecosystem and provides access to on-demand
translation portals for 10 million customers per month. Over 1000 service
professionals deliver consulting, implementation and language services through
its global infrastructure of more than 50 offices in 30 countries. For more
information, visit www.sdl.com.
Chairman's Statement
Summary Performance
The first half of 2006 saw SDL again achieve record revenue and operating
profits, ahead of market expectations. Revenues were up 34% at #45.6 million
(H1 2005: #34.1 million) with 12% of this revenue growth being organic and the
balance contributed by the acquisition of Trados. Profit before tax and
amortisation of intangible assets has increased by 45% to #5.1 million (H1 2005:
#3.5 million). SDL is now the world leader in Global Information Management
Technology, providing in excess of 150 enterprise solutions to major businesses
such as Canon, HP, Dell, FedEx, GSK, DaimlerChrysler and Bosch. SDL also
increased its market share of desktop software to over 90% of the translation
industries' professionals, with over 130,000 installations of SDL desktop
technology currently in the market place.
Our Technology
The successful integration of Trados into SDL has led to a considerable
improvement in gross margins, now at 50%, and hence improved the underlying
operating performance of the Group. With the combination of technology assets
and the extensive services experience of Trados and SDL, we have been able to
pool successfully the expertise and assets to deliver a completely integrated
suite of technology solutions across the translation ecosystem. In the last six
months we have seen an increased number of major corporations adopt SDL's Global
Information Management Solutions, including leading players in their markets
such as AGCO, Dell and FedEx. This is a positive message for SDL, confirming not
only the awareness of our solutions, but also the value they add to the leading
blue chip companies. We will be launching the first evolution of our new
platform technology 'SDL Trados Synergy' at the end of the third quarter of
2006. 'SDL Trados Synergy' has been designed to radically enhance the
performance of both Language Service Providers and corporate customers by
providing advanced project management and workflow technology currently only
incorporated into SDL's Enterprise products. This major advance in the industry
will provide completely integrated technology across the translation supply
chain so that all parties in the chain can benefit from smooth file integration
and effective translation logistics management.
Services Infrastructure
The Services side of the Group continues to go from strength to strength. Our
Knowledge-based Translation solutions have transformed the landscape for
translation, speeding up time to market and reducing costs. We are very excited
to have introduced this solution to key players in the market such as HP, CA and
Microsoft in the past 6 months. As a direct result of our focused sales efforts
on larger perpetual contracts we are now seeing an increasing number of these
larger contracts being signed with related ongoing services revenue. In addition
SDL now has arguably the most integrated and extensive local language office
network in the world, with a global infrastructure of language production
offices situated in more than 30 countries. All of these offices are fully
integrated with each other via SDL's Global Information Management Technology
and Management system, driving internal operational efficiencies and bringing
scalability to our services offering.
Vision and strategy for Global Information Management
The goal of Global Information Management is to accelerate the delivery of
global content into local markets, maintain branding and reduce production
costs. In order to provide comprehensive Global Information Management the
complete supply chain of those involved in the creation and maintenance of
global content must be included in the solution. SDL's technology provides
increased integration across this supply chain. As we start to release new
platform technology onto the market over the next 12 months, we are confident
that the major advances that we have made will significantly enhance the
productivity of the translation supply chain, stimulating growth in both the
technology and the localization services industry as a whole. SDL is also very
well placed to take advantage of the consolidation of the content management
space, being the world leader in Global Information Management, which is an
integral part of content management that has been overlooked up until recently.
Outlook
We expect to see continued strong financial returns from our investment in
Global Information Management, both from the services and the technology sides
of the business. We anticipate that the adoption of enterprise technology will
increase as we introduce new platform technologies into the market place and the
larger corporations continue to evolve their global content strategies. The
understanding and awareness of Global Information Management continues to be the
number one challenge to the growth of our business. However both our research*
and that of third parties emphasises that Global Information Management is
becoming increasingly important as corporations continue to globalize.
Accordingly we expect the company to show continued growth in both profits and
revenue.
Mark Lancaster
Chairman and CEO
SDL plc
4 September 2006
*see: http://www.sdl.com/company/press-releases-sdl/press-release-sdl.htm?id=66
SDL plc
Interim Condensed Consolidated Income Statement
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 31 December
Notes 2006 2005 2005
#'000 #'000 #'000
Continuing Operations
Sale of goods 5,351 757 7,425
Rendering of services 40,215 33,323 71,054
REVENUE (2) 45,566 34,080 78,479
Cost of sales (22,999) (20,147) (41,475)
GROSS PROFIT 22,567 13,933 37,004
Administrative expenses (16,951) (10,569) (29,288)
OPERATING PROFIT BEFORE
AMORTISATION OF INTANGIBLE ASSETS 5,616 3,364 7,716
Amortisation of intangible assets (1,443) (386) (1,952)
OPERATING PROFIT (3) 4,173 2,978 5,764
Finance costs (640) (9) (761)
Finance revenue 94 134 214
PROFIT BEFORE TAX 3,627 3,103 5,217
UK tax expense (453) (1,080) (1,185)
Foreign tax expense (4) (1,117) (215) (1,173)
Tax expense (1,570) (1,295) (2,358)
PROFIT FOR THE PERIOD ATTRIBUTABLE
TO EQUITY HOLDERS OF THE PARENT 2,057 1,808 2,859
Pence Pence Pence
Earnings per ordinary share - basic (pence) (5) 3.32 3.21 4.87
Earnings per ordinary share - diluted (pence) (5) 3.23 3.09 4.68
Adjusted earnings per ordinary share - basic (pence) (5) 5.65 3.90 8.20
Adjusted earnings per ordinary share - diluted (pence) (5) 5.51 3.76 7.87
SDL plc
Interim Condensed Consolidated Balance Sheet
Unaudited Unaudited Audited
30 June 30 June 31 December
2006 2005 2005
#'000 #'000 #'000
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 2,985 2,613 2,746
Intangible assets 61,610 23,668 63,583
Deferred income tax 1,484 1,136 1,640
Rent deposits 442 254 353
66,521 27,671 68,322
CURRENT ASSETS
Trade and other receivables 20,148 15,244 18,995
Cash and cash equivalents 6,157 12,950 6,976
26,305 28,194 25,971
TOTAL ASSETS 92,826 55,865 94,293
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (17,376) (11,987) (18,045)
Interest bearing loans and borrowings (2,000) - (2,000)
Current tax liabilities (4,013) (2,976) (4,068)
Provisions (305) (38) (500)
(23,694) (15,001) (24,613)
NON CURRENT LIABILITIES
Interest bearing loans and borrowings (14,605) - (17,092)
Deferred tax (2,540) (103) (2,596)
Provisions (378) (437) (398)
(17,523) (540) (20,086)
TOTAL LIABILITIES (41,217) (15,541) (44,699)
NET ASSETS 51,609 40,324 49,594
EQUITY
Share capital 623 566 615
Share premium 50,953 44,339 50,629
Shares to be issued 66 238 238
Retained earnings (731) (5,004) (2,893)
Foreign exchange differences 698 185 1,005
TOTAL EQUITY ATTRIBUTABLE TO 51,609 40,324 49,594
EQUITY HOLDERS OF THE PARENT
The Interim Financial Information presented in this Interim Report was approved
by the Board of Directors on 4 September 2006.
SDL plc
Interim Condensed Consolidated Statement of Changes in Equity
Shares Foreign
Share Share to be Retained Exchange
Capital Premium Issued Earnings Differences Total
#'000 #'000 #'000 #'000 #'000 #'000
At 31 December 2004 (audited) 561 44,165 213 (6,909) 532 38,562
Currency translation differences on
foreign currency intangibles and
net investments - - - - (189) (189)
Currency translation differences on
foreign currency equity loans to
foreign subsidiaries - - - - (158) (158)
Deferred taxation on share
based payments - - - 23 - 23
Tax credit for share options - - - - - -
Total income and expense for the
period recognised directly in equity - - - 23 (347) (324)
Net profit for the period - - - 1,808 - 1,808
Total income and expense
for the period - - - 1,831 (347) 1,484
Arising on share options 2 69 - - - 71
Arising on acquisition of Lomac 3 105 (108) - - -
Lingua Franca deferred
purchase consideration - - 133 - - 133
Share-based payments - - - 74 - 74
At 30 June 2005
(unaudited) 566 44,339 238 (5,004) 185 40,324
Currency translation differences on
foreign currency intangibles and
net investments - - - - 156 156
Currency translation differences on
foreign currency equity loans to
foreign subsidiaries - - - - 664 664
Deferred taxation on share
based payments - - - 395 - 395
Tax credit for share options - - - 464 - 464
Total income and expense for the
period recognised directly in equity - - - 859 820 1,679
Net profit for the period - - - 1,051 - 1,051
Total income and expense for
the period - - - 1,910 820 2,730
Arising on share options 4 202 - - - 206
Arising on acquisition of TRADOS 45 6,088 - - - 6,133
Share-based payments - - - 201 - 201
At 31 December 2005 (audited) 615 50,629 238 (2,893) 1,005 49,594
Interim Condensed Consolidated Statement of Changes in Equity (cont.)
Shares to Foreign
Share Share be Issued Retained Exchange
Capital Premium Earnings Differences Total
#'000 #'000 #'000 #'000 #'000 #'000
At 31 December 2005 615 50,629 238 (2,893) 1,005 49,594
Currency translation differences on
foreign currency intangibles and
net investments - - - - 121 121
Currency translation differences on
foreign currency equity loans to
foreign subsidiaries - - - - (428) (428)
Deferred taxation on share based
payments - - - (156) - (156)
Tax credit for share options - - - 111 - 111
Total income and expense for the
period recognised directly in equity - - - (45) (307) (352)
Net profit for the period - - - 2,057 - 2,057
Total income and expense for
the period - - - 2,012 (307) 1,705
Arising on share options 4 156 - - - 160
Arising on acquisition of Lomac 3 103 (106) - - -
Arising on acquisition of Lingua
Franca 1 65 (66) - - -
Share-based payments - - - 150 - 150
At 30 June 2006
(unaudited) 623 50,953 66 (731) 698 51,609
These amounts are attributable to equity holders of the parent.
SDL plc
Interim Condensed Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
#'000 #'000 #'000
Profit before tax 3,627 3,103 5,217
Depreciation of property, plant and equipment 547 484 1,122
Amortisation of intangible assets 1,443 386 1,952
Finance costs 640 9 761
Finance revenue (94) (134) (214)
Share-based payments 150 74 275
Loss on disposal of property, plant and equipment - 7 24
Increase in debtors (1,610) (2,103) (2,640)
(Decrease)/increase in current liabilities and provisions (1,165) 817 1,289
Exchange differences 4 (165) (123)
Income tax paid (1,202) (337) (1,956)
NET CASH FLOWS GENERATED FROM
OPERATING ACTIVITIES 2,340 2,141 5,707
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire property, plant and equipment (486) (499) (1,010)
Receipts from sale of property, plant and equipment - 19 201
Purchase of Trados Inc (76) (213) (30,328)
Net cash acquired with subsidiaries - 13 3,216
Interest received 94 134 214
NET CASH FLOWS USED IN INVESTING
ACTIVITIES (468) (546) (27,707)
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
#'000 #'000 #'000
FINANCING ACTIVITIES
Net proceeds from issue of ordinary share capital 160 70 277
Repayment of interest bearing loans and borrowings (2,162) - (2,385)
Proceeds from new loans - - 20,092
Interest paid (640) (9) (761)
NET CASH FLOWS GENERATED
FROM FINANCING ACTIVITIES (2,642) 61 17,223
(DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS (770) 1,656 (4,777)
MOVEMENT IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at start of the period 6,976 11,452 11,452
(Decrease)/increase in cash and cash equivalents (770) 1,656 (4,777)
Effect of exchange rates on cash and cash equivalents (49) (158) 301
Net cash and cash equivalents at end of the period 6,157 12,950 6,976
SDL plc
Notes to the Interim Condensed Consolidated Financial Statements
1. Basis of preparation and accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the six months ended
30 June 2006 have been prepared in accordance with IAS 34 Interim Financial
Reporting.
The interim condensed consolidated financial statements do not include all the
information and disclosures required in the annual financial statements, and
should be read in conjunction with the Group's annual financial statements as at
31 December 2005.
Significant accounting policies
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in
preparation of the Group's annual financial statements for the year ended 31
December 2005.
2. Segment information
The Group operates in the Global Information Management industry. The primary
reporting format is determined to be business segments, being Translation
Services and Technology.
The Translation Services segment is the provision of a translation service to
customer's multilingual content.
The Technology segment is the sale of desktop and enterprise technology
developed to help automate and manage the creation of multilingual assets.
The Group's geographical segments are based on the geographical destination of
revenues.
Prior to 30 June 2005 the Translation Services segment was the only business
segment in the primary reporting format.
Six months ended 30 June 2006 (unaudited)
Translation Technology Total
Services
#'000 #'000 #'000
Revenue 36,818 8,748 45,566
Segment results 4,803 (630) 4,173
Unallocated expenses (546)
Profit before tax 3,627
The Technology segment result before amortisation of intangible assets is a
profit of #428,000.
Year ended 31 December 2005 (audited)
Translation Technology Total
Services
#'000 #'000 #'000
Revenue 66,657 11,822 78,479
Segment results 8,107 (2,343) 5,764
Unallocated expenses (547)
Profit before tax 5,217
The Technology segment result before amortisation of intangible assets is a loss
of (#1,161,000).
Revenue by geographical destination was as follows:
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
#'000 #'000 #'000
United Kingdom 3,371 2,357 5,896
Rest of Europe 15,880 11,407 26,884
USA 18,595 14,779 33,102
Rest of North America 4,460 3,872 8,044
Rest of the World 3,260 1,665 4,553
45,566 34,080 78,479
3. Operating profit
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
#'000 #'000 #'000
Is stated after charging/(crediting):
Research and development expenditure 2,372 1,310 3,877
Depreciation of owned and leased assets 547 484 1,122
Amortisation of intangibles 1,443 386 1,952
Net foreign exchange differences (424) (617) (551)
4. Taxation
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
#'000 #'000 #'000
UK corporation tax:
UK current tax on income for the period 399 1,055 1,255
Adjustments in respect of prior periods - (150) (200)
Tax credit for share options taken to equity 111 150 464
510 1,055 1,519
Foreign tax:
Current tax on income for the period 1,117 215 1,260
Adjustments in respect of prior periods - - (87)
1,117 215 1,173
Total current taxation 1,627 1,270 2,692
Deferred taxation:
Origination and reversal of timing 99 25 (752)
differences
Deferred tax (debit)/credit for share
options taken to equity (156) - 418
Total deferred taxation (57) 25 (334)
Tax on profit 1,570 1,295 2,358
Due to the requirements of IAS 12, in conjunction with IFRS 2, the Schedule 23
tax credit for share options exercised is largely recorded in equity. For the 6
months ended 30 June 2006 this has the effect of increasing the effective tax
rate by around 2.2% (at 30 June 2005: 4%).
5. Earnings per share
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
#'000 #'000 #'000
Profit for the period attributable to equity
holders of the parent 2,057 1,808 2,859
m m m
Basic weighted average number of shares (million) 61.9 56.3 58.6
Employee share options and shares to be
issued (million) 1.6 2.1 2.5
Diluted weighted average number of
shares (million) 63.5 58.4 61.1
Adjusted earnings per share:
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
#'000 #'000 #'000
Profit for the period attributable to equity
holders of the parent 2,057 1,808 2,859
Amortisation of intangibles 1,443 386 1,952
Adjusted profit for the period attributable
to equity holders of the parent 3,500 2,194 4,811
m m m
Basic weighted average number of shares (million) 61.9 56.3 58.6
Diluted weighted average number of shares (million) 63.5 58.4 61.1
Pence Pence Pence
Adjusted earnings per ordinary share - basic (pence) 5.65 3.90 8.20
Adjusted earnings per ordinary share - diluted (pence) 5.51 3.76 7.87
6. Interest-bearing loans
On 31 March 2006 the Group repaid $1,491,000 of a secured bank loan bearing an
interest rate of LIBOR + 1.75%. On 30 June 2006 the Group repaid #500,000 of a
second secured bank loan also bearing an interest rate of LIBOR + 1.75%. In
addition on 30 June 2006 the Group repaid $1,400,000 of a secured revolving
credit facility bearing an interest rate of LIBOR + 1.875%.
Subsequent to 30 June 2006 the interest rates relating to the secured bank loans
and the secured revolving credit facility have been reduced to LIBOR + 1.25%.
7. Share-based payments
On 22 March 2006 236,667 stock options were issued. The exercise price of the
options of 220.75 pence is equal to the market price of the shares on the date
of issue.
In addition 566,101 awards were granted on 25 May 2006 under the long term
incentive program approved by the shareholders at the EGM on 27 April 2006. The
exercise price of these awards is #nil.
8. Derivatives and other financial instruments - hedges
At 30 June 2006 the Group had certain forward and forward plus contracts to
hedge future cash flows totalling $12 million through to December 2006 at rates
of $1.7355 and $1.7855 and totalling $6m at rates of $1.7350 and $1.7650 between
January and March 2007. There were no such contracts in place at 30 June 2005
and at 31 December 2005 the Group held contracts totalling $14 million through
July 2006 at a rate of $1.8115. As at 30 June 2006 the Group recognised an
unrealised gain of #538,000 in relation to the above hedge (30 June 2005 - #nil,
31 December 2005 - unrealised loss of #67,000).
9. Antitrust Division of U.S. Department of Justice enquiry re acquisition of
Trados Inc
During the period the Company announced that the Antitrust Division of the U.S.
Department of Justice had closed its investigation into the Company's
acquisition of Trados Inc.
10. General notes
The financial information in this interim statement does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. The
financial information for the year ended 31 December 2005 is based on the
statutory accounts for the financial year ended 31 December 2005. Those
accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the registrar of companies.
11. Events after the balance sheet date
There are no known events occurring after the date of this report that require
disclosure.
Independent Review Report to SDL plc
INTRODUCTION
We have been instructed by the company to review the financial information for
the six months ended 30 June 2006 which comprises the Consolidated Income
Statement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,
Consolidated Statement of Changes in Equity, and the related notes 1 to 11. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.
DIRECTORS' RESPONSIBILITIES
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
REVIEW WORK PERFORMED
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data, and based thereon,
assessing whether the accounting policies have been applied, unless otherwise
disclosed. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit performed in accordance with International Standards on
Auditing (UK and Ireland) and therefore provides a lower level of assurance than
an audit. Accordingly we do not express an audit opinion on the financial
information.
REVIEW CONCLUSION
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2006.
Ernst & Young LLP
Reading
4 September 2006
This information is provided by RNS
The company news service from the London Stock Exchange
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