RNS Number:5168R
SDL PLC
20 February 2007
20 February 2007
SDL PLC
Preliminary Results for the Year ended 31 December 2006
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 2006.
2006 2005 %
#'000 #'000 Change
Income Statement:
Revenue 94,711 78,479 +21%
Profit before tax and amortisation of intangibles 12,241 7,169 +71%
Profit before tax 9,376 5,217 +80%
Earnings per ordinary share - basic (pence) 9.91 4.87 +103%
Adjusted earnings per ordinary share - basic (pence) 14.52 8.20 +77%
Balance Sheet:
Total equity 54,506 49,594 +10%
Cash and cash equivalents 7,978 6,976 +14%
Interest bearing loans and borrowings 11,656 19,092 -39%
Operational Highlights:
* Results ahead of upgraded market expectations
* Solid growth in market share with 40 new enterprise software installations
in 2006
* Global Information Management gaining in recognition
* Gross margins increased to 49% in 2006 from 47% in 2005
* Significant new business wins include Dell, BMC, Avaya, Salesforce.com and
Intel
Commenting on the preliminary results Mark Lancaster, Chairman and Chief
Executive of SDL, said:
"This excellent 2006 performance is as a result of SDL continuing to increase
its lead in Global Information Management technology, combined with increased
utilisation of technology to leverage service margins, and an effective hedging
strategy to manage currency fluctuations.
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. The understanding and awareness of Global Information
Management continues to be the number one challenge to the growth of our
business. We do however expect to see a considerable uplift in awareness of the
complexities of creating and managing global content from companies that trade
globally. This will in part be driven by our increased investment in marketing
during 2007, but increasingly by the realisation of companies that language is
now a major competitive differentiator in winning and retaining market-share
across the globe. As the investments SDL has made into Knowledge-based
Translation continue to give increased returns, we expect to see more content
flow though this automated translation technology in 2007, which ultimately
brings higher margins to the group. In summary we believe that our efficient
services infrastructure and technology systems will offset the increase in
investment in marketing and the potential continued dollar weakness to provide
another year of growth in 2007.''
For further information please contact:
SDL plc On 20 February 2007 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 International
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.
Summary Performance
The second half of 2006 saw SDL again achieve record operating profits which are
significantly ahead of our upgraded market expectations. The prime drivers for
the increase over the upgraded expectations were the faster uptake of product
released towards the year end and stronger than anticipated sales and related
margins from certain service customers in December. Revenues for 2006 were up
21% at #94.7 million (2005: #78.5 million) with approximately half of this
revenue growth being organic and half contributed by a year of full trading in
Trados which was acquired in July 2005. Profit before tax and amortisation of
intangible assets has increased by 71% to #12.2 million (2005: #7.2 million).
The major contributors to the over performance in 2006 are SDL continuing to
increase its lead in Global Information Management technology, combined with
increased utilisation of technology to leverage service margins, and an
effective hedging strategy to manage currency fluctuations.
Our Technology
The successful integration of Trados into SDL has led to a considerable
improvement in gross margins, now at 49%, which has in turn improved the
underlying operating performance of the Group. We have seen interest in Global
Information Management technology increase considerably in 2006, particularly
for our hosted offerings accessed over the internet by our clients. This has
resulted in both strong service and software sales. We have experienced solid
growth in market share in both the desktop and the enterprise software markets
with over 140,000 installed units of desktop products and having added more than
40 installations of enterprise product into the market with such customers as
Dell, BMC and Avaya. We launched SDL Trados Synergy at the end of the third
quarter of 2006 resulting in a positive impact on our year end result, with the
uptake in this product being greater than we had anticipated. This is
encouraging feedback from the market as we will be launching major new releases
of our new platform technology throughout 2007. These major innovations in
technology will provide completely integrated technology across the translation
supply chain, enabling all parties, from freelance translators through language
service providers to corporations in the supply chain, to benefit from smooth
file integration and effective translation logistics management. We believe
these advancements in technology will further accelerate the trend for
enterprise content to be translated and tailored for local markets. The start of
this trend is already evidenced by companies such as Salesforce.com, Linde,
Bosch and Intel investing in Global Information Management technology to speed
up the translation of content for local markets.
Services Infrastructure
The services side of the business, which now operates in over 30 countries,
continues to benefit from the global reach, scale and leveraging of our
technology. The structure and integrated nature of our regional offices allows
considerable scaling and resource capacity which, when coupled with our
Knowledge-based Translation solutions, have transformed the landscape for
translation, speeding up time to market and reducing costs for our clients. We
continue to increase the quantity of words that flow through our Knowledge-based
Translation systems, for enterprise customers such as HP, Microsoft and Daimler
Chrysler. As well as the increased adoption of Knowledge-based Translation, 30%
of SDL's major clients have their content flowing through SDL's enterprise
translation management technology, driving internal operational efficiencies and
bringing scalability to our services offering.
Vision and strategy for Global Information Management
In a world that is moving closer together through ever more effective and
immediate communications infrastructure, trading effectively in global markets
is not an option for large corporations, it is a necessity. However, the
starting point to allow a business to trade in local markets is to speak to them
in their own language. The enormity and complexity of translating and
maintaining millions of words of global content into multiple languages in a
world where communications needs to be instant is a major challenge for any
business. Content is now delivered in multiple formats through many channels
from the web to hard copy. Press releases, marketing collateral, support
knowledge bases, not to mention a company's products and documentation, should
all share common wording and messaging to support a companies brand. The
creation and management of multiple language content is currently not addressed
by the content management technology available on the markets today.
SDL's Global Information Management technology accelerates the delivery of
global content into local markets, ensures the operational consistency of
branding and reduces the costs to translate content into multiple languages. In
order to provide comprehensive global content 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 automates the delivery of global
content in a controlled manner through this supply chain. As we continue to
release new vendor independent translation technology onto the market over the
next 12 months, we consider that the major advances that we have made in the
technology 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 previously overlooked.
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. The understanding and awareness of Global Information
Management continues to be the number one challenge to the growth of our
business. We do however expect to see a considerable uplift in awareness of the
complexities of creating and managing global content from companies that trade
globally. This will in part be driven by our increased investment in marketing
during 2007, but increasingly by the realisation of companies that language is
now a major competitive differentiator in winning and retaining market-share
across the globe. As the investments SDL has made into Knowledge-based
Translation continue to give increased returns, we expect to see more content
flow though this automated translation technology in 2007, which ultimately
brings higher margins to the group. In summary we believe that our efficient
services infrastructure and technology systems will offset the increase in
investment in marketing and the potential continued dollar weakness to provide
another year of growth in 2007.
Mark Lancaster
SDL plc
UNAUDITED CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2006
Notes 2006 2005
#'000 #'000
Sale of goods 10,190 7,425
Rendering of services 84,521 71,054
REVENUE 2 94,711 78,479
Cost of sales (47,947) (41,475)
GROSS PROFIT 46,764 37,004
Administrative expenses 3 (33,610) (29,288)
OPERATING PROFIT BEFORE AMORTISATION
OF INTANGIBLE ASSETS 13,154 7,716
Amortisation of intangible assets 3 (2,865) (1,952)
OPERATING PROFIT 3 10,289 5,764
Finance costs (1,143) (761)
Finance revenue 230 214
PROFIT BEFORE TAX 9,376 5,217
Tax expense 4 (3,213) (2,358)
PROFIT FOR THE PERIOD ATTRIBUTABLE
TO EQUITY HOLDERS OF THE PARENT 6,163 2,859
Earnings per ordinary share - basic (pence) 5 9.91 4.87
Earnings per ordinary share - diluted (pence) 5 9.53 4.68
Adjusted earnings per ordinary share - basic (pence) 5 14.52 8.20
Adjusted earnings per ordinary share - diluted (pence) 5 13.97 7.87
SDL plc
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2006
Notes 2006 2005
#'000 #'000
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 3,104 2,746
Intangible assets 6 58,381 63,583
Deferred tax asset 2,005 1,640
Rent deposits 313 353
63,803 68,322
CURRENT ASSETS
Trade and other receivables 20,739 18,995
Financial assets 474 -
Cash and cash equivalents 7,978 6,976
29,191 25,971
TOTAL ASSETS 92,994 94,293
CURRENT LIABILITIES
Trade and other payables (18,524) (17,925)
Interest bearing loans and borrowings (2,000) (2,000)
Financial liabilities - (120)
Current tax liabilities (4,361) (4,068)
Provisions (125) (500)
(25,010) (24,613)
NON CURRENT LIABILITIES
Interest bearing loans and borrowings (9,656) (17,092)
Other payables (456) -
Deferred tax liability (2,981) (2,596)
Provisions (385) (398)
(13,478) (20,086)
TOTAL LIABILITIES (38,488) (44,699)
NET ASSETS 54,506 49,594
EQUITY
Share capital 625 615
Share premium account 51,096 50,629
Shares to be issued 66 238
Retained earnings 4,334 (2,893)
Foreign exchange differences (1,615) 1,005
TOTAL EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT 54,506 49,594
SDL plc
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2005
Share Shares Retained Foreign
Share Premium to be Earnings Exchange
Capital Account Issued Differences Total
#'000 #'000 #'000 #'000 #'000 #'000
1 January 2005 561 44,165 213 (6,909) 532 38,562
Currency translation differences
on foreign currency net
investments and intangibles - - - - (33) (33)
Currency translation differences
on foreign currency equity loans
to foreign subsidiaries - - - - 506 506
Deferred income taxation on
share based payments (Note 4) - - - 418 - 418
Tax credit for share
options (Note 4) - - - 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 issues 9 376 (108) - - 277
Arising on acquisition of
Trados 45 6,088 - - - 6,133
Lingua Franca deferred
purchase consideration - - 133 - - 133
Share based
payments (Note 8) - - - 275 - 275
At 31 December 2005 615 50,629 238 (2,893) 1,005 49,594
SDL plc
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2006
Share Shares Retained Foreign
Share Premium to be Earnings Exchange
Capital Account Issued Differences Total
#'000 #'000 #'000 #'000 #'000 #'000
At 1 January 2006 615 50,629 238 (2,893) 1,005 49,594
Currency translation differences
on foreign currency intangibles
and net investments - - - - (1,485) (1,485)
Currency translation differences
on foreign currency equity loans
to foreign subsidiaries - - - - (1,135) (1,135)
Deferred income taxation on share
based payments (Note 4) - - - 179 - 179
Tax credit for share
options (Note 4) - - - 283 - 283
Total income and expense for the
year recognised directly in equity - - - 462 (2,620) (2,158)
Net profit for the year - - - 6,163 - 6,163
Total income and expense for
the year - - - 6,625 (2,620) 4,005
Arising on share options 6 299 - - - 305
Arising on acquisition of Lomac 3 103 (106) - - -
Arising on acquisition
of Lingua Franca 1 65 (66) - - -
Share based payments (Note 8) - - - 602 - 602
At 31 December 2006 625 51,096 66 4,334 (1,615) 54,506
SDL plc
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2006
Notes 2006 2005
#'000 #'000
PROFIT BEFORE TAX 9,376 5,217
Depreciation of property, plant and equipment 1,272 1,122
Amortisation of intangible assets 2,865 1,952
Finance costs 1,143 761
Finance revenue (230) (214)
Share based payments 602 275
(Gains)/losses on disposal of property, plant
& equipment (7) 24
Increase in trade and other receivables (1,825) (2,640)
Increase in trade and other payables 215 1,289
Exchange differences (1,032) (123)
Income tax paid (2,515) (1,956)
NET CASH FLOWS FROM OPERATING ACTIVITIES 9,864 5,707
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire property, plant & equipment (1,433) (1,010)
Receipts from sale of property, plant & equipment 49 201
Payments to acquire subsidiaries - (30,328)
Net cash acquired with subsidiaries - 3,216
Interest received 230 214
NET CASH FLOWS FROM INVESTING ACTIVITIES (1,154) (27,707)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issue of ordinary share capital 305 277
Repayment of interest bearing loans and borrowings 9 (6,596) (2,385)
Proceeds from new loans - 20,092
Interest paid (1,143) (761)
NET CASH FLOWS FROM FINANCING ACTIVITIES (7,434) 17,223
INCREASE /(DECREASE) IN CASH AND CASH EQUIVALENTS 1,276 (4,777)
MOVEMENT IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the start of year 6,976 11,452
Increase/(decrease) in cash and cash equivalents 9 1,276 (4,777)
Effect of exchange rates on cash and cash equivalents 9 (274) 301
NET CASH AND CASH EQUIVALENTS
AT END OF YEAR 9 7,978 6,976
SDL plc
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
These preliminary financial statements do not constitute statutory accounts
within the meaning of section 240 of the Companies Act 1985 and are unaudited.
The accounting policies adopted in the preparation of the preliminary financial
statements are consistent with those followed in preparation of the Group's
annual financial statements for the year ended 31 December 2005.
The financial statements for the year ended 31 December 2006 have yet to be
signed by the auditors.
2. SEGMENT INFORMATION
The Group operates in the translation and localisation 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 software products, documents, manuals and websites. As well as
translation of words, this incorporates desktop publishing, software engineering
and project management.
The Technology segment is the sale of desktop and enterprise technology
developed and owned by the Group to freelance translators, translation service
providers and to corporate translation end users who may perform the service
themselves. This includes both the sale of software licences and associated
support, maintenance and training services and more tailor made enterprise
solutions.
The Group's geographical segments are based upon the geographical destination of
sales.
Year ended 31 December 2006
Translation
Services Technology Total
#'000 #'000 #'000
Revenue
Sales to external customers 77,852 16,859 94,711
Segment results 11,332 (1,043) 10,289
Net finance costs (913)
Profit before tax 9,376
Tax expense (3,213)
Net profit for the year 6,163
Assets and liabilities
Segment assets 42,977 39,314 82,291
Unallocated assets 10,703
Total assets 92,944
Segment liabilities 15,860 2,397 18,257
Unallocated liabilities 20,231
Total liabilities 38,488
Other segment information
Capital expenditure 1,418 351 1,769
Share based payments 494 108 602
Depreciation 1,089 183 1,272
Amortisation 770 2,232 2,865
Year ended 31 December 2005
Translation
Services Technology Total
#'000 #'000 #'000
Revenue
Sales to external customers 66,657 11,822 78,479
Segment results 8,107 (2,343) 5,764
Net finance costs (547)
Profit before tax 5,217
Tax expense (2,358)
Net profit for the year 2,859
Assets and liabilities
Segment assets 44,087 39,158 83,245
Unallocated assets 11,048
Total assets 94,293
Segment liabilities 11,467 2,955 14,422
Unallocated liabilities 30,277
Total liabilities 44,699
Other segment information
Capital expenditure 962 48 1,010
Share based payments 234 41 275
Depreciation 1,025 97 1,122
Amortisation 770 1,182 1,952
Year ended 31 December 2006
Rest of Rest of
United Rest of North the
Kingdom Europe USA America World Total
Revenue #'000 #'000 #'000 #'000 #'000 #'000
Revenue from continuing
operations 7,307 34,121 36,823 9,704 6,756 94,711
Other segment information
Segment assets 25,823 33,747 17,728 2,884 2,109 82,291
Unallocated assets 10,703
Total assets 92,994
Capital expenditure
Property, plant and equipment 742 390 113 336 188 1,769
Year ended 31 December 2005
Rest of Rest of
United Rest of North the
Kingdom Europe USA America World Total
Revenue #'000 #'000 #'000 #'000 #'000 #'000
Revenue from continuing operations 5,896 26,884 33,102 8,044 4,553 78,479
Other segment information
Segment assets 28,803 31,685 18,333 2,824 1,600 83,245
Unallocated assets 11,048
Total assets 94,293
Capital expenditure
Property, plant and equipment 355 414 45 63 133 1,010
3. OTHER REVENUE AND EXPENSES
Group operating profit is stated after charging/(crediting):
2006 2005
#'000 #'000
Included in administrative expenses:
Research and development expenditure 4,724 3,877
Bad debt expense 11 13
Depreciation of property, plant and equipment 1,272 1,122
Amortisation of intangible fixed assets 2,865 1,952
Operating lease rentals for plant and machinery 67 194
Operating lease rentals for land and buildings 4,181 3,229
Operating lease rentals received for land and buildings (150) (150)
Net foreign exchange gains (1,256) (551)
The net foreign exchange gains above arose due to movements in foreign
currencies between the time of the original transaction and the realisation of
the cash collection or spend, the benefits of foreign currency instruments on
certain transactions during the year, the valuation of foreign currency
instruments at the end of the year and the retranslation of US Dollar
denominated loans.
Auditors' Remuneration
Audit of the Group financial statements 154 133
Other fees to auditors:
Local statutory audits for subsidiaries 73 89
Other taxation services 102 76
Other services 24 21
In 2005 Ernst and Young received #291,000 as reporting accountants and advisors
in respect of the Group's acquisition of Trados in July 2005.
4. INCOME TAX
(a) Income tax on profit:
2006 2005
#'000 #'000
Current taxation
UK Income tax charge/(credit)
Current tax on income for the period 670 1,255
Adjustments in respect of prior periods (242) (200)
Tax credit for share options taken to equity 283 464
711 1,519
Foreign tax
Current tax on income for the period 2,201 1,260
Adjustments in respect of prior periods (72) (87)
2,129 1,173
Total current taxation 2,840 2,692
Deferred income taxation
Origination and reversal of temporary differences (277) (752)
Adjustments in respect of prior periods 471 -
Deferred tax credit for share options taken to equity 179 418
Total deferred income tax 373 (334)
Tax expense(see (b) below) 3,213 2,358
An aggregate tax credit in respect of share based compensation for current and
deferred taxation of #462,000 (2005: #882,000) 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% (2005: 30%). The
differences are reconciled below:
2006 2005
#'000 #'000
Profit on ordinary activities before tax 9,376 5,217
Profit on ordinary activities at standard rate of tax in
the UK 30% (2005: 30%) 2,813 1,565
Expenses not deductible for tax purposes 235 216
Non deductible amortisation of intangibles 550 365
Non taxable income - (91)
Adjustments in respect of previous years 157 (287)
Utilisation of tax losses brought forward (424) (304)
Current tax losses not available for offset 55 1,157
Effect of overseas tax rates (378) (249)
Other 205 (14)
Tax expense (see (a) above) 3,213 2,358
5. EARNINGS PER SHARE
The calculation of basic earnings per ordinary share is based on a profit after
tax of #6,163,000 (2005: #2,859,000) and 62,159,156 (2005: 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 as described in note 8. For 2006 the
diluted ordinary shares were based on 64,641,295 ordinary shares that included
2,482,139 potential weighted number of options.
The following reflects the income and share data used in the basic, diluted and
adjusted earnings per share computations:
2006 2005
#'000 #'000
Profit for the period attributable to equity holders of the parent 6,163 2,859
Amortisation of intangible fixed assets 2,865 1,952
Adjusted profit for the period attributable to equity holders
of the parent 9,028 4,811
2006 2005
No. No.
Weighted average number of ordinary shares for basic
earnings per share 62,159,156 58,674,412
Effect of dilution resulting from share options 2,482,139 2,473,434
Weighted average number of ordinary shares adjusted
for the effect of dilution 64,641,295 61,147,846
2006 2005
Adjusted earnings per ordinary share - basic (pence) 14.52 8.20
Adjusted earnings per ordinary share - diluted (pence) 13.97 7.87
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.
6. INTANGIBLE ASSETS
Intellectual
Property Goodwill Total
#'000 #'000 #'000
Cost:
At 1 January 2005 6,270 32,758 39,028
Acquisition of subsidiaries 13,615 28,038 41,653
Currency adjustment 63 157 220
At 1 January 2006 19,948 60,953 80,901
Currency adjustment (858) (1,616) (2,474)
At 31 December 2006 19,090 59,337 78,427
Amortisation:
At 1 January 2005 (3,163) (12,203) (15,366)
Provided during the year (1,952) - (1,952)
At 1 January 2006 (5,115) (12,203) (17,318)
Provided during the year (2,865) - (2,865)
Currency adjustment 137 - 137
At 31 December 2006 (7,843) (12,203) (20,046)
Net book value:
At 31 December 2006 11,247 47,134 58,381
At 1 January 2006 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 (2005: #nil).
7. INTEREST BEARING LOANS AND BORROWINGS
2006 2005
#'000 #'000
Current
Current instalments due on bank loans 2,000 2,000
Non-current
Non - current instalments due on bank loans 9,656 17,092
Bank loans comprise the following:
2006 2005
#'000 #'000
US $3,006,926 variable rate secured term loan 1,534 3,122
#6,400,000 variable rate secured term loan 6,400 10,900
US $7,294,000 variable rate secured revolving credit facility 3,722 5,070
11,656 19,092
Less current instalments due on bank loans (2,000) (2,000)
9,656 17,092
US $ variable rate secured term loan and # variable rate secured term loan
These loans are secured and combined are repayable in quarterly instalments of
#500,000 with the final balance being repaid in 2010. The loans bear interest
at LIBOR + 1.25%.
US $ 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 + 1.25%. 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.
Under the credit facility agreement, the Group is subject to certain financial
covenants relating to cash flow, gearing, interest rate cover and capital
expenditure. The Group is also required to maintain a certain percentage of cash
within those Group companies that are guarantors of the facility. Since entering
into the facility agreement the Group has fully complied with these covenants.
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.
On 27 April 2006 a long term incentive plan (LTIP) was formally approved by the
shareholders at an EGM. The award of any LTIP shares is made at nil costs to the
directors or employees at the end of a three year holding period provided
stringent performance targets have been met.
On 25 May 2006 500,228 LTIP shares were granted to the executive directors and
certain senior management employees at a market price of #1.895 with a
performance period of three years from date of grant. A further 428,574 and 40,
000 LTIP shares were issued on 18 July 2006 and 1 September 2006, at market
prices of #1.955 and #2.05 respectively, to managers and technical staff
considered important to the future of the SDL Group.
The expense recognised for all share-based payments in respect of employee
services received during the year to 31 December 2006 is #602,000 (2005:
#275,000).
SDL Share Option Scheme
The table below sets out the number and weighted average exercise prices (WAEP)
of, and movements in, the SDL Share Options Scheme during the year:
2006 2006 2005 2005
No. WAEP No. WAEP
Outstanding at the beginning of the year 3,846,729 #0.70 3,786,433 #0.68
Granted during the year 371,667 #2.18 702,000 #1.19
Forfeited during the year (33,001) #1.17 (20,417) #1.11
Exercised during the year (679,227) #0.45 (502,377) #0.53
Expired during the year (83,750) #1.79 (118,910) #3.90
Outstanding at the end of the year 3,422,418 #0.87 3,846,729 #0.70
Exercisable at 31 December 2,061,418 #0.56 2,400,891 #0.56
The weighted average share price at the date of exercise for the options
exercised is #2.10 (2005: #1.57).
For the share options outstanding as at 31 December 2006, the weighted average
remaining contractual life is 6.57 years (2005: 6.88 years).
The fair value of equity settled share options granted under the SDL Share
Option Scheme is estimated as at the date of grant using the Black Scholes
model. The following table lists the inputs to the model:
2006 2005
Weighted average share price (pence) 218 119
Expected volatility 35% 55%
Option life 5 years 5 years
Expected dividends 1% 1%
Risk-free interest rate 5% 5%
The range of exercise prices for options outstanding at the end of the year was
#0.01-#3.60 (2005: #0.01-#3.60).
2006 2005
Date of Grant Exercise Period Number Number
#0.01 - #0.50 01/01/92-16/04/03 10 years after grant date 1,134,244 1,549,367
#0.51 - #1.00 15/10/99-12/12/03 10 years after grant date 636,531 771,862
#1.01 - #1.50 02/04/04-04/04/05 10 years after grant date 1,290,276 1,471,750
#1.51 - #2.00 07/04/01 10 years after grant date 9,250 14,750
#2.01 - #2.50 22/03/06-03/10/06 10 years after grant date 321,117 -
#3.01 - #3.60 12/05/00 10 years after grant date 31,000 39,000
Total 3,422,418 3,846,729
SDL Long Term Incentive Plan
The fair value of equity-settled shares granted under the SDL Long Term
Incentive Plan is estimated as at the date of grant using a Monte-Carlo model,
taking into account the terms and conditions upon which the options were
granted. The following table lists the inputs to the model used for the years
ended 31 December 2006.
2006
Expected volatility 35%
Expected life 3 years
Expected dividends 0%
Risk-free interest rate 5%
2006 2006
No. WAEP
Outstanding at the beginning of the year - -
Granted during the year 968,802 -
Forfeited during the year (33,167) -
Exercised during the year - -
Expired during the year - -
Outstanding at the end of the year 935,635 -
Exercisable at 31 December Nil -
All LTIPs are exercisable at nil cost to the individual.
9. ADDITIONAL CASH FLOW INFORMATION
Analysis of group net debt:
1 January Cash Exchange 31 December
2006 flow differences 2006
#'000 #'000 #'000 #'000
Cash and cash equivalents 6,976 1,276 (274) 7,978
Loans (19,092) 6,596 840 (11,656)
(12,116) 7,872 566 (3,678)
1 January Cash Exchange Non cash 31 December
2005 flow differences movement 2005
#'000 #'000 #'000 #'000 #'000
Cash and cash equivalents 11,452 (4,777) 301 - 6,976
Loans - (17,707) - (1,385) (19,092)
11,452 (22,484) 301 (1,385) (12,116)
The non cash movement in 2005 is the debt acquired with Trados in July 2005.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR TLMLTMMBBBMR
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