RNS Number:7186O
SDL PLC
26 February 2008
26 February 2008
SDL PLC
Preliminary results for the year ended 31 December 2007
SDL reports strong progress with revenue and PBTA ahead of expectations and a
positive outlook
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 2007.
2007 2006 %
�'000 �'000 Change
Income Statement:
Revenue 117,409 94,711 +24%
Profit before tax and amortisation of intangibles 17,019 12,241 +39%
Profit before tax 12,725 9,376 +36%
Earnings per ordinary share - basic (pence) 13.07 9.91 +32%
Adjusted earnings per ordinary share - basic (pence) 19.19 14.52 +32%
Balance Sheet:
Total equity 113,016 54,506
Cash and cash equivalents 21,511 7,978
Interest bearing loans and borrowings 6,055 11,656
Highlights:
* Results ahead of market expectations
* Gross Margin up 4% points to 54%
* Strengthening of SDL's leadership position in the GIM and Web Content
Management market with the successful acquisition and integration of Tridion
and Passolo
* Strong progress across all of the Group's divisions:
* SDL Tridion achieves triple digit revenue growth in the US
* SDL Trados achieves 26% increase in new licence growth
* Significant new business wins:
* TomTom, Gulf Bank, GLA (SDL Tridion)
* Cisco, Deloitte, FIFA (SDL Trados)
* Citrix, VMWare, Fujitsu - Siemens (SDL Enterprise Products)
Post Period End:
* Acquisition of Idiom in February 2008 for �11.1m plus the assumption of
debt of �2.5m:
* Further strengthens SDL's leadership position as a leading provider of
GIM solutions
* Adds a number of blue chip customers to SDL's customer base
* Combines SDL's and Idiom's technology solutions to provide better
efficiencies of scale and shared intellectual property
Commenting on the preliminary results Mark Lancaster, Chairman and Chief
Executive of SDL, said:
"I am delighted to report a continued strong performance in the year, reflecting
the encouraging fundamentals of the Group. Our performance, which was ahead of
market expectations, was driven by organic and acquisitive growth and a
sustained demand for our technology and services solutions, despite the
weakening dollar.
During the year we successfully completed the acquisition of Tridion, a Web
Content Management company, and Passolo, which strengthened our software product
offering. The recent acquisition of Idiom, one of the leading providers of "
Software as a Service" translation management systems further strengthens the
Group's position and we believe enables SDL to further its strategic aims and
establish itself as a global leader in GIM solutions.
At present we are continuing to see positive trading in almost all of our global
markets across both the services and technology business units. Whilst
globalisation is a long term trend for most businesses, we must acknowledge the
current macro-economic uncertainty, and therefore our approach to managing the
business in 2008 will be appropriately cautious. We are, however, fortunate that
70% of our revenue is derived from localisation services, and this revenue
stream has proven in the past to be fairly robust and resistant to localised
economic downturns. It is also important to note that Asia continues to be a
vibrant market and that as companies anticipate challenges in their local
economy they tend to look toward their global markets to fill revenue shortfalls
that they are experiencing in their home markets. Creating and managing global
content is SDL's business, so even in the technology sector, global web content
management remains a high priority for global business. We have seen an
encouraging start to 2008 with a healthy services order book and a strong
pipeline for technology."
For further information please contact:
SDL plc Tel: 01628 410 127
Mark Lancaster, Chief Executive
Alastair Gordon, Finance Director
Financial Dynamics Tel: 020 7831 3113
Juliet Clarke/Edward Bridges/Haya Chelhot
About SDL
SDL (London Stock Exchange: 'SDL') is the leader in Global Information
Management (GIM) solutions that empower organisations 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
localisation 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 400 enterprise GIM solutions, has deployed over 150,000
software licenses across the GIM ecosystem and provides access to on-demand
translation portals for 10 million customers per month. Over 1,000 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
I am pleased to report that SDL recorded another impressive year in 2007, with
both revenue and operating profits ahead of market expectations, despite the
negative effect of the weak US dollar during the year. The prime drivers for the
increase over the upgraded expectations for 2007 were the strong contributions
from both Global Information Management (GIM) technology and SDL Tridion, which
was acquired in May 2007. Revenues for 2007 were up 24% at �117.4 million
(2006: �94.7 million) with approximately 8% of this revenue growth being organic
and 16% contributed by the seven months of trading in SDL Tridion. Profit before
tax and amortisation of intangible assets has increased by 39% to �17.0 million
(2006: �12.2 million) while profit before taxation has increased by 36% to �12.7
million (2006: �9.4 million). Strong cash flow from operations of �16.0 million
(2006: �9.9 million) has contributed to transforming net debt of �3.7 million as
at 31 December 2006 to net cash of �15.5 million at 31 December 2007.
Technology
SDL Tridion (global Web Content Management business unit)
The acquisition of Tridion was well timed from an industry perspective and it
has subsequently been integrated successfully into the SDL business. SDL
Tridion achieved record results in terms of its revenue and profitability in
2007 with:
* triple digit revenue growth in the US in 2007
* over half of the licence revenues derived from new customers
* continued investment in expansion into US and Asia Pacific
SDL Tridion's focus on enabling customers to deliver consistent and persuasive
customer experiences in multiple languages across multiple Web sites and
channels has led to significant global customer expansion. The substantial
number of new customers in 2007 includes TomTom, Fortis ASR, NXP Semiconductors,
State of Minnesota, Gulf Bank, Philippine Airlines, Greater London Authority and
Disneyland Resort Paris. Many existing customers have also extended their SDL
Tridion installations.
With these encouraging results, SDL Tridion has confirmed its position as one of
the most profitable vendors in the public enterprise class Web Content
Management (WCM) sector. SDL Tridion is now the fastest growing public
enterprise class WCM vendor.
SDL Trados Technology and SDL Translation Management Systems
The SDL Enterprise Products business has experienced an increase in new name
licence sales of 70% during 2007, adding customers such as Citrix, VMWare,
Fujitsu-Siemens and Alcatel Lucent to its portfolio of leading global
businesses. SDL Trados Technologies, a business unit which focuses on
productivity software for the translation supply chain, has witnessed a double
digit revenue increase and a 26% increase in new licence growth. Both business
units attribute their strong demand to our customers' increasing need to unify
processes across the entire localisation supply chain, creating significant
efficiencies and quicker time-to-market by utilising a common platform for
localisation. In addition SDL Trados Technologies announced major new wins at
blue chip companies including Cisco Systems, Deloitte, Drager Medical and FIFA.
Localisation Services
What has been most encouraging in 2007 is the scaling of the regional production
centres, enabling them to increase their revenue throughput by upwards of 27%,
whilst only increasing internal headcount by 10%. It is the unique mix of
technology, infrastructure and process that allows us to scale to our larger
customers' needs. The localisation 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, a technology SDL considers is crucial for
the future. One of the other important trends that we saw in the latter half of
2007 was a marked increase in business process outsourcing activity. The Group
has recorded a significant increase in interest in its outsourcing capabilities,
which has created a strong pipeline at the start of 2008.
Vision and Strategy for Global Information Management
In a world that is shrinking through an ever more effective and immediate
communications infrastructure, trading effectively in global markets is no
longer an option for large corporations, it is now a necessity. The starting
point to enable a business to trade successfully in local markets is to
communicate in the local language. The enormity and complexity of translating
and maintaining millions of words of global content in multiple languages, in a
world where communications must be instantaneous, is a major challenge for any
business. Content is now delivered in multiple formats, through many channels
from the web to physical hard copy. Press releases, marketing collateral,
support knowledge databases, not to mention a company's products and
documentation, should all share common wording and messaging to fully support a
company's brand. However, the creation and management of multiple language
content is currently not addressed by the content management technology
available on the markets today.
SDL's GIM 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
throughout this entire supply chain. It is estimated that over 90% of the Global
1000 companies rely on SDL Technology products, creating a solid foundation for
future growth in a world that increasingly communicates across political and
cultural boundaries
Idiom Acquisition
The acquisition of Idiom for �11million announced on 11 February 2008
consolidates SDL's leading position in delivering GIM systems to the market. The
main drivers behind the Idiom acquisition were:
* the enhancement of SDL's GIM technology offering;
* the addition of a number of key blue chip customers to SDL's customer base;
* the combination of SDL's and Idiom's technology solutions, which will
provide improved efficiencies of scale and shared intellectual property;
* the provision of a smoother solution for managing the translation supply
chain;
* the increase in SDL's consultancy, sales and development expertise; and
* the strengthening of SDL's position as a leading provider of GIM solutions
The integration of Idiom into SDL's operation has many parallels to that of the
Trados acquisition, one which has already delivered considerable long term
benefits to SDL. During 2008 we expect Idiom to be break even in terms of
operating profit. However, moving into 2009 we expect to see a significant
contribution in terms of technology to the enlarged group.
Outlook
At present we are continuing to see positive trading in almost all of our global
markets across both the services and technology business units. Whilst
globalisation is a long term trend for most businesses, we must acknowledge the
current macro-economic uncertainty, and therefore our approach to managing the
business in 2008 will be appropriately cautious. We are, however, fortunate that
70% of our revenue is derived from localisation services, and this revenue
stream has proven in the past to be fairly robust and resistant to localised
economic downturns. It is also important to note that Asia continues to be a
vibrant market and that as companies anticipate challenges in their local
economy they tend to look toward their global markets to fill revenue shortfalls
that they are experiencing in their home markets. Creating and managing global
content is SDL's business, so even in the technology sector, global web content
management remains a high priority for global business. We have seen an
encouraging start to 2008 with a healthy services order book and a strong
pipeline for technology.
Mark Lancaster
Chairman and Chief Executive
SDL plc
UNAUDITED Consolidated INCOME STATEMENT
for the year ended 31 December 2007
Notes 2007 2006
�'000 �'000
Sale of goods 17,930 10,190
Rendering of services 99,479 84,521
REVENUE 3 117,409 94,711
Cost of sales (54,521) (47,947)
GROSS PROFIT 62,888 46,764
Administrative expenses 4 (45,695) (33,610)
Operating profit before amortisation
of intangible assets 17,193 13,154
Amortisation of intangible assets 4 (4,294) (2,865)
Operating profit 4 12,899 10,289
Finance revenue 489 230
Finance costs (628) (1,143)
Share of loss of associate (35) -
PROFIT BEFORE TAX 12,725 9,376
Tax expense 5 (3,555) (3,213)
PROFIT for the YEAR 9,170 6,163
Earnings per ordinary share - basic (pence) 6 13.07 9.91
Earnings per ordinary share - diluted (pence) 6 12.83 9.53
Adjusted earnings per ordinary share - basic (pence) 6 19.19 14.52
Adjusted earnings per ordinary share - diluted (pence) 6 18.84 13.97
SDL plc
UNAUDITED CONSOLIDATED BALANCE SHEET
As at 31 December 2007
Notes 2007 2006
�'000 �'000
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 3,240 3,104
Intangible assets 7 102,300 58,381
Investment in an associate 256 -
Loan to associate 286 -
Deferred tax asset 4,663 2,005
Rent deposits 333 313
111,078 63,803
CURRENT ASSETS
Trade and other receivables 33,687 20,739
Financial assets - 474
Cash and cash equivalents 21,511 7,978
55,198 29,191
TOTAL ASSETS 166,276 92,994
CURRENT LIABILITIES
Trade and other payables (32,048) (18,524)
Interest bearing loans and borrowings 8 (2,000) (2,000)
Financial liabilities (793) -
Current tax liabilities (5,948) (4,361)
Provisions (58) (125)
(40,847) (25,010)
NON CURRENT LIABILITIES
Interest bearing loans and borrowings 8 (4,055) (9,656)
Other payables (215) (456)
Deferred tax liability (7,541) (2,981)
Provisions (602) (385)
(12,413) (13,478)
TOTAL LIABILITIES (53,260) (38,488)
NET ASSETS 113,016 54,506
EQUITY
Share capital 750 625
Share premium account 91,866 51,096
Shares to be issued 541 66
Retained earnings 14,921 4,334
Foreign exchange differences 4,938 (1,615)
TOTAL EQUITY 113,016 54,506
SDL plc
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2007
Share Shares Foreign
Share Premium to be Retained Exchange
Capital Account Issued Earnings 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 net investments
and intangibles - - - - (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 5) - - - 179 - 179
Tax credit for share
options (Note 5) - - - 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 9) - - - 602 - 602
At 31 December 2006 625 51,096 66 4,334 (1,615) 54,506
SDL plc
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2007
Share Shares Foreign
Share Premium to be Retained Exchange
Capital Account Issued Earnings Differences Total
�'000 �'000 �'000 �'000 �'000 �'000
At 1 January 2007 625 51,096 66 4,334 (1,615) 54,506
Currency translation
differences on foreign
currency net investments
and intangibles - - - - 5,573 5,573
Currency translation
differences on foreign
currency equity loans
to foreign subsidiaries - - - - 980 980
Deferred income taxation
on share based payments
(Note 5) - - - (359) - (359)
Tax credit for share
options (Note 5) - - - 945 - 945
Total income and expense
for the year recognised
directly in equity - - - 586 6,553 7,139
Net profit for the year - - - 9,170 - 9,170
Total income and
expense for the year - - - 9,756 6,553 16,309
Arising on share options 11 655 - - - 666
Arising on acquisition
of Lingua Franca 1 65 (66) - - -
Arising on acquisition
of Tridion 113 39,915 - - - 40,028
Arising on acquisition
of Passolo - 135 541 - - 676
Share based payments
(Note 9) - - - 831 - 831
At 31 December 2007 750 91,866 541 14,921 4,938 113,016
SDL plc
UNAUDITED consolidated CASH FLOW STATEMENT
for the year ended 31 December 2007
Notes 2007 2006
�'000 �'000
PROFIT BEFORE TAX 12,725 9,376
Depreciation of property, plant and equipment 1,506 1,272
Amortisation of intangible assets 7 4,294 2,865
Finance revenue (489) (230)
Finance costs 628 1,143
Share of loss of associate 35 -
Share based payments 831 602
Losses/(gains) on disposal of property, plant & equipment 17 (7)
Increase in trade and other receivables (7,967) (1,825)
Increase in trade and other payables 4,114 215
Exchange differences 2,684 (1,032)
Income tax paid (2,373) (2,515)
NET CASH FLOWS FROM OPERATING ACTIVITIES 16,005 9,864
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire property, plant & equipment (1,425) (1,433)
Receipts from sale of property, plant & equipment 46 49
Payments to acquire subsidiaries (47,747) -
Net cash acquired with subsidiaries 11,813 -
Payment to acquire investment in associate (291) -
Cash advances and loans made to associate (286) -
Interest received 489 230
NET CASH FLOWS FROM INVESTING ACTIVITIES (37,401) (1,154)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issue of ordinary share capital 40,829 305
Repayment of interest bearing loans and borrowings (6,492) (6,596)
Proceeds from new loans 1,023 -
Interest paid (628) (1,143)
NET CASH FLOWS FROM FINANCING ACTIVITIES 34,732 (7,434)
INCREASE IN CASH AND CASH EQUIVALENTS 13,336 1,276
MOVEMENT IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the start of year 7,978 6,976
Increase in cash and cash equivalents 10 13,336 1,276
Effect of exchange rates on cash and cash equivalents 10 197 (274)
NET CASH AND CASH EQUIVALENTS AT END OF YEAR 10 21,511 7,978
SDL plc
notes to the unaudited financial statements
1. BASIS OF ACCOUNTING
These preliminary financial statements do not constitute statutory accounts
within the meaning of section 240 of the Companies Act 1985 and are unaudited.
With the exception of the disclosure requirements of IFRS 7, 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 2006.
The financial statements for the year ended 31 December 2007 have yet to be
signed by the auditors.
The consolidated financial statements of SDL plc and its subsidiaries have been
prepared in accordance with International Financial Reporting Standards as
adopted by the EU as relevant to the financial statements of SDL plc.
The Group adopted IFRS 7 'Financial Instruments' for the first time in the year
ended 31 December 2007 and new disclosures have been included in the financial
statements.
2. BUSINESS COMBINATIONS
Acquisition of Tridion Holding BV
On 18 May 2007 the Group acquired 100% of the share capital of Tridion Holding
BV, a company based in the Netherlands.
The total cost of the combination comprised Euro69 million (�49 million) and was
funded through both the placing and open offer of 11.3m shares on the London
Stock Exchange, raising �40m net of expenses, and from the Group's existing cash
resources.
The fair value of the identifiable assets and liabilities of Tridion Holding BV
as at the date of acquisition were:
Book value Fair value
to Group
�'000 �'000
Intangible assets* - 17,727
Property, plant and equipment 140 140
Cash and cash equivalents 11,491 11,491
Trade receivables 3,780 3,746
Other receivables 714 714
Trade payables (1,114) (1,114)
Other payables (6,335) (6,369)
Deferred tax assets - 3,177
Deferred tax liabilities - (5,318)
Net assets 8,676 24,194
Provisional goodwill arising on acquisition 25,020
49,214
* Provisional
Discharged by: �'000
Costs associated with the acquisition 2,075
Cash paid 47,139
Total 49,214
Cash outflow on the acquisition:
Net cash and cash equivalents acquired
with the subsidiary 11,491
Cash paid (47,139)
Net cash outflow (35,648)
From the date of acquisition Tridion Holding BV has contributed �14,707,000 of
revenue and �3,888,000 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 intangible assets for the Group would have been �16,557,000
and revenue from continuing operations would have been �123,630,000. Included
in the �25,020,000 of provisional 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. The key assumptions applied in valuing the acquired
intangible are being validated and the amounts are therefore stated on a
provisional basis.
Acquisition of PASS Process Automation Software Systems Engineering GmbH
On 15 June 2007 the Group acquired the business of PASS Process Automation
Software Systems Engineering GmbH (Passolo), based in Bonn, Germany.
The total cost of the combination comprised cash of Euro1,000,000 (�676,000), of
which Euro100,000 is held in escrow, and 160,728 ordinary shares, 32,146 of which
were issued on completion. The total fair value of shares in the Group, both
issued on completion and to be issued in the future, was Euro1,000,000 (�676,000).
The acquisition value is �4.21 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 PASS Process
Automation Software Systems Engineering GmbH as at the date of acquisition were:
Book value Fair value to
Group
�'000 �'000
Intangible assets - 626
Property, plant and equipment 21 21
Cash and cash equivalents 322 322
Trade receivables 77 77
Other receivables 12 12
Trade payables (2) (2)
Other payables (135) (376)
Deferred tax liabilities - (187)
Net assets 295 493
Goodwill arising on acquisition 905
1,398
Discharged by: �'000
Costs associated with the acquisition 46
Shares issued at fair value 135
Shares to be issued at fair value 541
Cash paid 608
Cash held in escrow 68
Total 1,398
Cash outflow on the acquisition:
Net cash and cash equivalents acquired
with the subsidiary 322
Cash paid (608)
Net cash outflow (286)
From the date of acquisition PASS Process Automation Software Systems
Engineering GmbH has contributed revenue of �240,000 and a profit of �61,000 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 assets amortisation for the
Group would have been �17,143,000 and revenue from continuing operations would
have been �117,755,000. Included in the �905,000 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.
3. 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
the 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 2007
Translation
Services Technology Total
�'000 �'000 �'000
Revenue
Sales to external customers 84,178 33,231 117,409
Segment results 12,670 194 12,864
Net finance costs (139)
Profit before tax 12,725
Tax expense (3,555)
Net profit for the year 9,170
Assets and liabilities
Segment assets 47,692 91,710 139,402
Unallocated assets 26,874
Total assets 166,276
Segment liabilities 15,726 15,997 31,723
Unallocated liabilities 21,537
Total liabilities 53,260
Other segment information
Capital expenditure 1,059 527 1,586
Depreciation 1,105 401 1,506
Amortisation 771 3,523 4,294
Unallocated assets and liabilities include cash, loans, taxation and
intercompany balances. The investment in and loss of the associate are both
included in the Technology segment above.
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 92,994
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 2,095 2,865
Year ended 31 December 2007
Rest of Rest
United Rest of North of the
Kingdom Europe USA America World Total
Revenue �'000 �'000 �'000 �'000 �'000 �'000
Revenue from continuing operations 11,148 46,368 41,229 10,437 8,227 117,409
Other segment information
Segment assets 25,359 74,839 33,823 3,026 2,355 139,402
Unallocated assets 26,844
Total assets 166,246
Capital expenditure
Property, plant and equipment 524 568 214 80 200 1,586
Year ended 31 December 2006
Rest of Rest
United Rest of North of 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
Unallocated assets and liabilities include cash, loans, taxation and
intercompany balances. The investment in and loss of the associate are both
included in the Rest of Europe segment in 2007 above.
4. OTHER REVENUE AND EXPENSES
Group operating profit is stated after charging/(crediting):
2007 2006
�'000 �'000
Included in administrative expenses:
Research and development expenditure 5,374 4,724
Bad debt 114 (216)
Depreciation of property, plant and equipment 1,506 1,272
Amortisation of intangible fixed assets 4,294 2,865
Operating lease rentals for plant and machinery 69 67
Operating lease rentals for land and buildings 3,737 3,252
Operating lease rentals received for land and buildings (150) (150)
Net foreign exchange losses/(gains) 644 (662)
Loss/(gain) on derivatives 1,267 (594)
The net foreign exchange losses 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. Included
Auditor's remuneration
Audit of the Group financial statements 235 222
Other fees to auditors:
Local statutory audits for 48 31
subsidiaries
Other taxation services* 170 92
Other services* 186 -
* - Included within these two captions are fees amounting to �253,000 in
relation to the acquisitions in the year (2006: �nil) which have been
capitalised as opposed to charged through the profit and loss account.
5. INCOME TAX
(a) Income tax on profit:
2007 2006
�'000 �'000
Current taxation
UK Income tax charge/(credit)
Current tax on income for the period - 670
Adjustments in respect of prior periods (131) (242)
Tax credit for share options taken to equity 945 283
814 711
Foreign tax
Current tax on income for the period 3,311 2,201
Adjustments in respect of prior periods (36) (72)
3,275 2,129
Total current taxation 4,089 2,840
Deferred income taxation
Origination and reversal of temporary differences (104) (277)
Adjustments in respect of prior periods (71) 471
Deferred tax credit for share options taken to equity (359) 179
Total deferred income tax (534) 373
Tax expense (see (b) below) 3,555 3,213
An aggregate tax credit in respect of share based compensation for current and
deferred taxation of �586,000 (2006: �462,000) has been recognised in equity in
the year.
(b) Factors affecting 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% (2006: 30%). The
differences are reconciled below:
2007 2006
�'000 �'000
Profit on ordinary activities before tax 12,725 9,376
Profit on ordinary activities at standard rate of tax in
the UK 30% (2006: 30%) 3,818 2,813
Expenses not deductible for tax purposes 201 235
Non deductible amortisation of intangibles 230 550
Non taxable income (101) -
Adjustments in respect of previous years (238) 157
Utilisation of tax losses brought forward (112) (424)
Current tax losses not available for offset 241 55
Effect of overseas tax rates (572) (378)
Other 88 205
Tax expense (see (a) above) 3,555 3,213
6. EARNINGS PER SHARE
The calculation of basic earnings per ordinary share is based on a profit after
tax of �9,170,000 (2006: �6,163,000) and 70,157,960 (2006: 62,159,156) 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 9. For 2007 the
diluted ordinary shares were based on 71,474,309 ordinary shares that included
1,316,349 potential weighted number of options.
The following reflects the income and share data used in the basic, diluted and
adjusted earnings per share computations:
2007 2006
�'000 �'000
Profit for the year 9,170 6,163
Amortisation of intangible fixed assets 4,294 2,865
Adjusted profit for the year 13,464 9,028
The tax benefit associated with the amortisation of the intangible fixed assets
of �1,016,000 (2006: �592,000) has not been adjusted in the calculation of
adjusted profit for the year outlined above.
2007 2006
No. No.
Weighted average number of ordinary shares for basic
earnings per share 70,157,960 62,159,156
Effect of dilution resulting from share options 1,316,349 2,482,139
Weighted average number of ordinary shares adjusted
for the effect of dilution 71,474,309 64,641,295
2007 2006
Adjusted earnings per ordinary share - basic (pence) 19.19 14.52
Adjusted earnings per ordinary share - diluted (pence) 18.84 13.97
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.
7. INTANGIBLE ASSETS
Intellectual
Property Goodwill Total
�'000 �'000 �'000
Cost:
At 1 January 2006 19,948 60,953 80,901
Currency adjustment (858) (1,616) (2,474)
At 1 January 2007 19,090 59,337 78,427
Acquisition of subsidiaries 18,353 25,925 44,278
Currency adjustment 1,599 2,555 4,154
At 31 December 2007 39,042 87,817 126,859
Amortisation:
At 1 January 2006 (5,115) (12,203) (17,318)
Provided during the year (2,865) - (2,865)
Currency adjustment 137 - 137
At 1 January 2007 (7,843) (12,203) (20,046)
Provided during the year (4,294) - (4,294)
Currency adjustment (219) - (219)
At 31 December 2007 (12,356) (12,203) (24,559)
Net book value:
At 31 December 2007 26,686 75,614 102,300
At 1 January 2007 11,247 47,134 58,381
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 (2006: �nil).
8. INTEREST BEARING LOANS AND BORROWINGS
2007 2006
�'000 �'000
Current
Current instalments due on bank loans 2,000 2,000
Non-current
Non - current instalments due on bank loans 4,055 9,656
Bank loans comprise the following:
2007 2006
�'000 �'000
US variable rate secured term loan - 1,534
�3,900,000 variable rate secured term loan 3,900 6,400
US $4,294,000 variable rate secured revolving credit facility 2,155 3,722
6,055 11,656
Less current instalments due on bank loans (2,000) (2,000)
4,055 9,656
�3,900,000 variable rate secured term loan
This loan is secured and repayable in quarterly instalments of �500,000 with the
final balance being repaid in 2010. The loan bears interest at LIBOR + 1.25%.
US $4,294,000 variable rate secured revolving credit facility
This loan is secured on the net assets of the Group companies held in the
security group and is drawn down under an available 5-year term revolving credit
facility up to the equivalent of �5 million. 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 60% 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.
9. SHARE-BASED PAYMENT PLANS
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:
2007 2007 2006 2006
No. WAEP No. WAEP
Outstanding at the beginning of the year 3,422,418 �0.87 3,846,729 �0.70
Granted during the year 680,000 �3.75 371,667 �2.18
Forfeited during the year (82,250) �1.10 (33,001) �1.17
Exercised during the year (1,139,160) (�0.58) (679,227) �0.45
Expired during the year - - (83,750) �1.79
Outstanding at the end of the year 2,881,008 �1.65 3,422,418 �0.87
Exercisable at 31 December 1,559,761 �0.77 2,061,418 �0.56
The weighted average share price at the date of exercise for the options
exercised is �3.73 (2006: �2.10).
For the share options outstanding as at 31 December 2007, the weighted average
remaining contractual life is 6.44 years (2006: 6.57 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:
2007 2006
Weighted average share price (pence) 218 218
Expected volatility 35% 35%
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-�3.745 (2006: �0.01-�3.60).
Date of Grant Exercise Period 2007 2006
Number Number
�0.01 - �0.50 01/01/92-16/04/03 10 years after grant date 538,753 1,134,244
�0.51 - �1.00 15/10/99-12/12/03 10 years after grant date 481,693 636,531
�1.01 - �1.50 02/04/04-04/04/05 10 years after grant date 882,812 1,290,276
�1.51 - �2.00 07/04/01 10 years after grant date 4,250 9,250
�2.01 - �2.50 22/03/06-03/10/06 10 years after grant date 272,500 321,117
�3.01 - �3.50 12/05/00-1/6/00 10 years after grant date 17,000 31,000
�3.51 - �4.00 16/10/00-23/5/07 10 years after grant date 684,000 -
Total 2,881,008 3,422,418
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 2007.
2007 2006
Expected volatility 35% 35%
Expected life 3 years 3 years
Expected dividends 0% 0%
Risk-free interest rate 5% 5%
2007 2007 2006 2006
No. WAEP No. WAEP
Outstanding at the beginning of the year 935,635 - - -
Granted during the year 321,074 - 968,802 -
Forfeited during the year (65,995) - (33,167) -
Outstanding at the end of the year 1,190,714 - 935,635 -
Exercisable at 31 December Nil - Nil -
On 23 February 2007 321,074 LTIP shares were granted to the executive directors
and certain senior management employees at a market price of �3.336 with a
performance period of three years from date of grant.
All LTIPs are exercisable at nil cost to the individual.
10. ADDITIONAL CASH FLOW INFORMATION
Analysis of group net debt:
1 January Cash Exchange 31 December
2007 flow differences 2007
�'000 �'000 �'000 �'000
Cash and cash equivalents 7,978 13,336 197 21,511
Loans (11,656) 5,469 132 (6,055)
(3,678) 18,805 329 15,456
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)
11. POST BALANCE SHEET EVENTS
a. Acquisition of Idiom Technologies Inc
On 11 February 2008, the Company announced the acquisition of Idiom Technologies
Inc, one of the leading providers of "Software as a Service" translation
management systems, for a consideration of $21.7m (�11.1m) plus the assumption
of debt and working capital of $4.9m (�2.5m). The acquisition was financed in
part by the drawdown of �9.5m from a new �20m revolving credit facility (see (b)
below) and in part from the Company's own cash resources.
b. �20m Revolving Credit Facility
Since the year end the Company has entered into a �20m Revolving Credit Facility
with The Royal Bank of Scotland. This new facility replaces the Term Loan and
Revolving Credit Facility entered into in 2005, the balance of which at 31
December 2007 is set out in Note 8. This facility is available until February
2012 and is on a margin of between 85 and 140 basis points above LIBOR,
depending on the performance of the Company against certain covenants. On 7
February 2008, the Company drew down �9.5m of this facility as part of the
funding of the acquisition of Idiom Technologies Inc. Repayment of the facility
does not commence until February 2011 when the facility reduces to �15m.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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