TIDMSDL
RNS Number : 4103C
SDL PLC
07 March 2011
7 March 2011
SDL PLC
Preliminary results for the year ended 31 December 2010
Strong year of progress with positive revenue growth across all
operating segments, significant advancement in GIM solution
adoption
SDL plc ("SDL" or "the Group"), the leading provider of Global
Information Management (GIM) solutions, announces its unaudited
preliminary results for the year ended 31 December 2010.
2010 2009 %
GBP'000 GBP'000 Change
Income Statement:
Revenue 203,549 171,878 +18%
Profit before tax and amortisation
of intangibles 35,395 29,821 +19%
Profit before tax 28,808 24,013 +20%
Earnings per ordinary share - basic
(pence) 28.39 23.55 +21%
Adjusted earnings per ordinary share
- basic (pence) 34.70 29.05 +19%
Maiden proposed final dividend (per
ordinary share) - pence 5.5 - n/a
Balance Sheet:
Total equity 195,512 173,105 +13%
Cash and cash equivalents 46,628 46,160 +1%
Interest bearing loans and borrowings - -
Operational highlights
- Strong growth in revenue and profit before taxation and
amortisation
- Accelerated investment in growth, innovation investment
increase of GBP2.6 million
- New customers include Affinion, Fidelity Investments, Saab,
United Airlines, Virgin Money and AstraZeneca
- Accelerated adoption of GIM solution set based on rapid
commercial development of end-to-end content management offer,
strong leverage in Structured Content Technology
- Four new product launches, two in Structured Content
Technology and two in Language Technologies, next generation
statistical machine translation platform launched with SDL
BeGlobal
- Two further strategic acquisitions strengthen positioning:
o Language Weaver in Language Technologies gives SDL leading
edge statistical machine translation capability
o Xopus in Structured Content Management expands technical
content creation possibilities to non technical authors
- Business remains strongly cash generative: cash balance of
GBP46.6 million after net cash outflow of GBP25.9 million on
acquisitions. Group has no external debt
- Given confidence in business model, maiden dividend of 5.5
pence per ordinary share has been recommended by the board
Commenting on these results, Mark Lancaster, Executive Chairman
said today:
"We are delighted to report a year of strong strategic progress,
record revenue and excellent operating profit performance. In the
period we saw a steadily improving demand environment for our
technology and services. We were particularly pleased with the
levels of cross-selling of products and services achieved during
the year, delivering broader Global Information Management
solutions that address our customers' strategic needs."
"We are pleased to report double digit headline revenue growth
in each of our operating segments, which bears testament to the
resilience of the business to the economic cycle. Headline Group
revenue growth comprised acquisition related growth of 4%, a
negligible impact due to foreign exchange and constant currency
revenue growth of 14%. We finished the year strongly, particularly
in our Web Content Management business, where changes in
organisational structure built positive momentum. In general, we
are confident that the demand pipeline in each operating segment
remains robust moving into 2011."
"Our balance sheet remains a considerable source of competitive
advantage and comfort as we have no external debt. At the end of
2010 we had GBP46.6 million of cash on the balance sheet. Given our
confidence in future cash generation and ability to sustain
strategic and operational progress the board is recommending a
maiden final dividend to the Annual General Meeting of 5.5 pence
per ordinary share."
"We increased our strategic investments in 2010, accelerating
investment in innovation, research and development, and supporting
our growth in Asian territories. We introduced several new products
to market in 2010: SDL BeGlobal a next generation statistical
machine translation technology; SDL Trisoft with enhanced DITA
support; SDL Contenta S1000D in the structured content management
space; and we launched SDL Global Authoring Management System 2010
in Language Technologies."
Commenting on current trading, John Hunter, Chief Executive
Officer, added:
"Initial trading is positive in 2011 and in the absence of a
major economic reverse we are confident that 2011 will be another
good growth year for SDL. Economic signs are still variable in some
segments but we are seeing a more sustained recovery in
demand."
"We have made solid progress in integrating the two businesses
acquired in 2010, and have strengthened our executive management
team. We believe we have a sound platform and the right strategy in
place. We have no debt and our cash position gives us solid
opportunity to pursue further strategic growth options, both
organic and through acquisition, should they arise."
For further information please contact:
SDL plc Tel: 01628 410 127
Mark Lancaster, Executive Chairman
John Hunter, Chief Executive
Financial Dynamics Tel: 020 7831 3113
Edward Bridges / Haya Herbert-Burns /Emma
Appleton
About SDL
SDL is the leader in Global Information Management. Global
Information Management enables companies to engage with their
customers throughout the customer journey - from brand awareness,
to sales and after-sales support - and across languages, cultures
and channels.
SDL's best-of-breed Web Content Management, eCommerce,
Structured Content and Language Technologies, combined with its
Language Services drive down the cost of content creation,
management, translation and publishing. SDL solutions increase
conversion ratios and customer satisfaction through targeted
information across all customer touch points.
Global industry leaders who rely on SDL include ABN-Amro, Bosch,
Canon, CNH, FICO, GlaxoSmithKline, Hewlett-Packard, KLM, Microsoft,
NetApp, Philips, SAP and Sony. SDL has over 1500 enterprise
customers, has deployed over 170,000 software licenses and provides
access to on-demand portals for 10 million customers per month. It
has a global infrastructure of more than 60 offices in 35
countries. For more information, visit www.sdl.com.
Executive Chairman's Statement
Summary Performance
We are delighted to report a year of strong strategic progress,
record revenue and excellent operating profit performance. In the
period we saw a steadily improving demand environment for our
technology and services. We were particularly pleased with the
levels of cross-selling of products and services achieved during
the year, delivering broader Global Information Management
solutions that address our customers' strategic needs.
We increased our strategic investments in 2010, accelerating
investment in innovation, research and development, and supporting
our growth in Asian territories. We introduced several new products
to market in 2010: SDL BeGlobal a next generation statistical
machine translation technology; SDL Trisoft with enhanced DITA
support; SDL Contenta S1000D in the structured content management
space; and we launched SDL Global Authoring Management System 2010
in Language Technologies.
We made two strategic acquisitions during the year. The
acquisition of Language Weaver gives SDL an industry leading
position in statistical machine translation. By further increasing
the speed of translation, we believe this acquisition will
significantly increase the volume of content that companies can
economically choose to translate. The acquisition of Xopus
increases technical content creation possibilities by facilitating
content creation by non technical authors. Both of these
acquisitions further strengthen the SDL end-to-end content
management offering. The Xopus business is now fully integrated
into our Structured Content Management Technologies business and is
therefore reported as part of the Content Management Technologies
operating segment. Language Weaver is reported as part of our
Language Technologies operating segment which is run as an
integrated global business under common leadership.
The executive team was further strengthened with the appointment
of Mark Reid as Chief Information Officer and Dennis van der Veeke
as Chief Technology Officer, both key appointments.
Revenue for 2010 was GBP203.5 million (2009: GBP171.9 million).
Operating profit before taxation and amortisation of intangible
assets ("PBTA") for the period was GBP35.4 million (2009: GBP29.8
million) with profit before taxation of GBP28.8 million (2009:
GBP24.0 million). Net cash in the business at the end of the period
was GBP46.6 million (2009: GBP46.2 million) after net cash outflow
of GBP25.9 million due to acquisitions during the year.
We are pleased to report double digit headline revenue growth in
each of our operating segments, which bears testament to the
resilience of the business to the economic cycle. Headline Group
revenue growth comprised acquisition related growth of 4%, a
negligible impact due to foreign exchange and constant currency
revenue growth of 14%. We finished the year strongly, particularly
in our Web Content Management business, where changes in
organisational structure built positive momentum. In general, we
are confident that the demand pipeline in each operating segment
remains robust moving into 2011. We have made excellent progress in
cross-selling solutions, the Content Management segment in
particular, recording constant currency revenue growth of 21%, has
been a prime beneficiary of this cross-selling approach. We are
very pleased with the two acquisitions, Xopus and Language Weaver,
both now fully integrated from a leadership, systems and execution
perspective. This rapid integration puts us in a good position to
execute our growth strategy aspirations in these businesses in
2011.
Our operating cash flow from operations amounted to GBP27.1
million in 2010 (2009: GBP30.1million). We were unable to repeat
the working capital inflow we saw in 2009 when we significantly
reduced receivable days, however our average DSO has been
marginally improved in 2010 with strong exit revenues generating
higher receivables. Our profit to cash conversion remains
excellent. Our balance sheet remains a considerable source of
competitive advantage and comfort as we have no external debt. At
the end of 2010 we had GBP46.6 million of cash on the balance
sheet. Given our confidence in future cash generation and ability
to sustain strategic and operational progress the board is
recommending a maiden final dividend to the Annual General Meeting
of 5.5 pence per ordinary share. This will not alter our strategy
of pursuing strong profitable growth but will provide a return to
those investors who value a nominal yield in addition to growth.
Our future dividend policy will be progressive.
Segmental Performance
We continue to report the business in three operating segments
in 2010 as our shareholders find this additional disclosure
valuable. Our operating segments are Content Management
Technologies, Language Technologies and Language Services.
Content Management Technologies (contributing GBP45.0 million or
22% of revenue to the Group and GBP7.7 million or 22% of Group
PBTA) (2009: contributing GBP33.2 million or 19% of revenue to the
Group and GBP6.4 million or 22% of Group PBTA)
Overall revenue in this segment grew by 36%, 16% due to
acquisition, -1% due to foreign exchange and 21% growth at constant
currency. We are delighted by the performance of this segment,
which reflects strong cross leveraging from the rest of the SDL
Group,
SDL Web Content Management Solutions performed well. Both Europe
and North America had strong second half performance. Structured
Content Management made exceptional progress in 2010, with the
combination of traditional XyEnterprise strengths with SDL Trisoft
continuing to be a potent combination and market innovator. We look
to 2011 with confidence in this business from a position of
industry leadership in technical document Xml publishing, component
content management and Live Content solutions.
We were pleased to welcome as clients investing in Content
Management Technology, Unilever, Atmel, Affinion, Fidelity
Investments, Saab, United Airlines and Virgin Money.
Language Technologies (contributing GBP33.9 million or 17% of
revenue to the Group and GBP3.3 million or 9% of Group PBTA) (2009:
contributing GBP29.1 million or 17% revenue to the Group and GBP3.5
million or 12% of Group PBTA)
Overall headline sales growth was 17% in the Language
Technologies business of which 8% was due to acquisition, currency
impact was negligible and constant currency revenue growth was
9%.
We saw consistent demand stabilisation in the Enterprise
business and solid momentum build in our desktop business in the
second half reflecting our demand generation initiatives and
considerable expansion in China. We have made significant progress
integrating Language Weaver into the Language Technologies business
unit. Language Weaver performance versus equivalent period in 2009
was robust and we continue to invest heavily in statistical machine
translation in order to rapidly expand the addressable market for
both commercial and government sectors.
Clients investing in Language Technologies in 2010 included
Total, National Cancer Institute, Novartis, European Patent Office,
Avaya and TripAdvisor.
Language Services (contributing GBP124.6 million or 61% of group
revenue and GBP25.2 million or 71% of Group PBTA). (2009:
contributing GBP109.6 million or 64% of group revenue and GBP19.8
million or 66% of Group PBTA).
2010 was a strong year for the Language Services segment.
Significant account growth and new customer wins led to organic
revenue growth of 14% with negligible currency impact. The business
made significant progress in North America and execution was strong
in Asia against a strategic goal of building position in Japan,
China and Korea. The business had several significant new client
wins in 2010 including AstraZeneca, Dassault Systemes, Regus,
FlexLink and VMWare. The business remains highly profitable and
cash generative and we have continued to focus on effective global
sourcing strategy and network optimisation in 2010, making two
strategic commitments to opening offices in Turkey and Chile.
Statistical machine translation is proving highly complementary to
our core language services offering, driving efficiencies and
competitive advantage.
Global Information Management Vision and Strategy
In 2010 we made significant progress in building our end-to-end
content management solutions and we have clear plans to leverage
our broadened capabilities and offerings in 2011. It is clear to us
that SDL's solutions can play a compelling role helping our clients
engage with their clients in a consistent way across multiple
languages and channels, thereby optimising the experience of their
own clients through content use. We build brand equity for our
clients and accelerate globalisation and roll out of new products.
SDL's vision is aligned to macro-trends such as growth of the
internet, the accelerating adoption of cloud-based computing, the
globalisation of businesses, and the continued rapid growth of
Asian economies. Within our client base and internally at SDL there
is a rapid movement towards live and collaborative content,
personalisation and targeting and we have a range of scalable
end-to-end solutions to meet these needs.
We are committed to remain the innovator in the Global
Information Management space and look to a future which is about
seamless product integrations and leading edge product innovation
combined with consistent execution and delivery. The acquisition of
Language Weaver and Xopus extend solution set availability and
should increase accessible market size and ability to penetrate.
More and more clients are realising the power of combined use of
our Web Content Management, Structured Content Management and
Language Technologies. We are also committed to make each client's
experience with SDL an engaging and compelling one.
Outlook and Current Trading
Initial trading is positive in 2011 and in the absence of a
major economic reverse we are confident that 2011 will be another
good growth year for SDL. Economic signs are still variable in some
segments but we are seeing a more sustained recovery in demand.
We have made solid progress in integrating the two businesses
acquired in 2010, and have strengthened our executive management
team. We believe we have a sound platform and the right strategy in
place. We have no debt and our cash position gives us solid
opportunity to pursue further strategic growth options, both
organic and through acquisition, should they arise.
We have an exciting year in prospect in 2011, with Tridion 2011
a next generation Web Content Management product with strong
integration to other SDL technologies already released to market
and an exciting roadmap of innovation looking ahead.
We are therefore confident in our growth prospects and our long
term potential to reward investors with continued profitable growth
and strong shareholder returns.
Mark Lancaster
Executive Chairman
SDL plc
UNAUDITED Consolidated INCOME STATEMENT
for the year ended 31 December 2010
Notes 2010 2009
GBP'000 GBP'000
Sale of goods 34,642 25,363
Rendering of services 168,907 146,515
REVENUE 3 203,549 171,878
Cost of sales (87,626) (76,387)
GROSS PROFIT 115,923 95,491
Administrative expenses - excluding
amortisation of intangibles 4 (80,738) (66,096)
--------- ---------
Operating profit before amortisation
of intangible assets 35,185 29,395
Administration expenses - amortisation
of intangible assets 4 (6,587) (5,808)
------------------------------------------------ ------ --------- ---------
Operating profit 4 28,598 23,587
Finance revenue 322 426
Finance costs (112) -
PROFIT BEFORE TAX 28,808 24,013
Tax expense 5 (6,764) (6,060)
PROFIT for the YEAR 22,044 17,953
--------- ---------
Profit for the year attributable to equity
holders of the parent 22,044 17,944
Non-controlling interest - 9
--------- ---------
22,044 17,953
--------- ---------
Earnings per ordinary share - basic (pence) 6 28.39 23.55
Earnings per ordinary share - diluted
(pence) 6 27.44 22.79
Adjusted earnings per ordinary share (basic and diluted) are
shown in note 6.
SDL plc
UNAUDITED Consolidated STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2010
Notes 2010 2009
GBP'000 GBP'000
Profit for the period 22,044 17,953
-------- ---------
Currency translation differences on foreign
operations (3,191) (13,549)
Currency translation differences on foreign
currency equity loans to foreign subsidiaries (895) 2,255
Income tax benefit on currency translation
differences on foreign currency equity
loans to foreign subsidiaries 5 90 847
OTHER COMPREHENSIVE INCOME (3,996) (10,447)
-------- ---------
TOTAL COMPREHENSIVE INCOME 18,048 7,506
======== =========
Attributable to:
Equity holders of the parent 18,048 7,497
Non-controlling interests - 9
18,048 7,506
======== =========
SDL plc
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2010
Notes 2010 2009
GBP'000 GBP'000
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 6,323 5,005
Intangible assets 7 159,305 137,624
Deferred tax asset 6,356 5,621
Rent deposits 903 819
--------- ---------
172,887 149,069
CURRENT ASSETS
Trade and other receivables 52,140 40,456
Cash and cash equivalents 9 46,628 46,160
--------- ---------
98,768 86,616
TOTAL ASSETS 271,655 235,685
--------- ---------
CURRENT LIABILITIES
Trade and other payables (54,631) (45,504)
Current tax liabilities (10,326) (6,794)
Provisions (1,224) (1,102)
--------- ---------
(66,181) (53,400)
NON CURRENT LIABILITIES
Other payables (622) (65)
Deferred tax liability (8,592) (7,298)
Provisions (748) (1,817)
--------- ---------
(9,962) (9,180)
TOTAL LIABILITIES (76,143) (62,580)
========= =========
NET ASSETS 195,512 173,105
========= =========
EQUITY
Share capital 780 770
Share premium account 94,974 93,207
Shares to be issued - 203
Retained earnings 75,047 50,218
Foreign exchange differences 24,711 28,707
--------- ---------
TOTAL EQUITY 195,512 173,105
========= =========
SDL plc
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2010
Share Shares Foreign Non-
Share Premium to be Retained Exchange controlling
Capital Account Issued Earnings Differences Interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2009 757 92,483 406 30,250 39,154 (21) 163,029
Profit for the
period - - - 17,944 - 9 17,953
Other
comprehensive
income - - - - (10,447) - (10,447)
-------- -------- -------- --------- ------------ ------------ ---------
Total
comprehensive
income - - - 17,944 (10,447) 9 7,506
Deferred
income
taxation on
share based
payments
(Note 5) - - - (220) - - (220)
Tax credit for
share options
(Note 5) - - - 635 - - 635
Arising on
share issues 13 533 - - - - 546
Arising on
share
cancellation - (12) - - - - (12)
Arising on
acquisition
of Trisoft - - - - - 12 12
Arising on
acquisition
of Passolo - 203 (203) - - - -
Share based
payments
(Note 8) - - - 1,609 - - 1,609
At 31 December
2009 770 93,207 203 50,218 28,707 - 173,105
Share Shares Foreign Non-
Share Premium to be Retained Exchange controlling
Capital Account Issued Earnings Differences Interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2010 770 93,207 203 50,218 28,707 - 173,105
Profit for the
period - - - 22,044 - - 22,044
Other
comprehensive
income - - - - (3,996) - (3,996)
-------- -------- -------- --------- ------------ ------------ --------
Total
comprehensive
income - - - 22,044 (3,996) - 18,048
Deferred
income
taxation on
share based
payments
(Note 5) - - - 342 - - 342
Tax credit for
share options
(Note 5) - - - 557 - - 557
Arising on
share issues 10 1,564 - - - - 1,574
Arising on
acquisition
of Passolo - 203 (203) - - - -
Share based
payments
(Note 8) - - - 1,886 - - 1,886
At 31 December
2010 780 94,974 - 75,047 24,711 - 195,512
SDL plc
UNAUDITED consolidated STATEMENT OF CASH FLOWS
for the year ended 31 December 2010
Notes 2010 2009
GBP'000 GBP'000
PROFIT BEFORE TAX 28,808 24,013
Depreciation of property, plant and equipment 2,561 1,980
Amortisation of intangible assets 7 6,587 5,808
Finance revenue (322) (353)
Finance costs 112 -
Share based payments 1,886 1,609
Loss on disposal of property, plant &
equipment 89 -
(Increase) / decrease in trade and other
receivables (9,727) 6,997
Increase / (decrease) in trade and other
payables 3,639 (3,981)
Exchange differences (2,053) 587
--------- ---------
CASH GENERATED FROM OPERATIONS 31,580 36,660
Income tax paid (4,510) (6,584)
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES 27,070 30,076
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire property, plant &
equipment (2,568) (1,286)
Receipts from sale of property, plant
& equipment 85 108
Payments to acquire subsidiaries (27,880) (14,182)
Net cash acquired with subsidiaries 1,958 1,427
Interest received 363 353
--------- ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES (28,042) (13,580)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issue of ordinary share
capital 1,574 535
Repayment of capital leases (157) -
Interest paid (112) -
NET CASH FLOWS FROM FINANCING ACTIVITIES 1,305 535
INCREASE IN CASH AND CASH EQUIVALENTS 333 17,031
========= =========
MOVEMENT IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the start
of year 46,160 31,227
Increase in cash and cash equivalents 9 333 17,031
Effect of exchange rates on cash and
cash equivalents 9 135 (2,098)
NET CASH AND CASH EQUIVALENTS AT END
OF YEAR 9 46,628 46,160
========= =========
SDL plc
notes to the UNaudited financial statements
1. BASIS OF ACCOUNTING
Basis of preparation
The financial information set out above does not constitute the
Group's statutory financial statements for the years ended 31
December 2010 or 2009. Statutory consolidated financial statements
for the Group for the year ended 31 December 2009, prepared in
accordance with adopted IFRS, have been delivered to the Registrar
of Companies. The auditors have reported on the 2009 accounts;
their report was (i) unqualified, (ii) did not include a reference
to any matters to which the auditors drew attention by way of any
emphasis without qualifying their opinion and (iii) did not contain
a statement under Section 498 (2) or (3) of the Companies Act
2006.
The statutory consolidated financial statements for 2010 will be
finalised on the basis of the financial information presented by
the Directors in this preliminary announcement and will be
delivered to the Registrar of Companies in due course.
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.
Significant accounting policies
The accounting policies adopted in the preparation of the
condensed consolidated financial statements are consistent with
those followed in preparation of the Group's annual financial
statements for the year ended 31 December 2009, except for the
adoption of new Standards and Interpretations as of 1 January 2010,
noted below:
IFRS 3 Business Combinations
The Group adopted the revised standards from 1 January 2010.
IFRS 3 (Revised) introduces significant changes in the accounting
for business combinations occurring after this date. Changes affect
the valuation of non-controlling interest, the accounting for
transaction costs, the initial recognition and subsequent
measurement of a contingent consideration and business combinations
achieved in stages. Transaction costs are recognised in
administration expenses. These changes impact the amount of
goodwill recognised in the reported results in the period that an
acquisition occurs and future reported results. IAS 27 (Amended)
requires that a change in the ownership interest of a subsidiary
(without loss of control) is accounted for as a transaction with
owners in their capacity as owners. Therefore, such transactions no
longer give rise to goodwill, nor give rise to a gain or loss.
Furthermore, the amended standard changes the accounting for losses
incurred by the subsidiary as well as the loss of control of a
subsidiary. The changes required by IFRS 3 (Revised) and IAS 27
(Amended) will affect future acquisitions or loss of control of
subsidiaries and transactions with non-controlling interests. The
change in accounting policy was applied prospectively and had no
material impact on earnings per share or the results for the period
ended 31 December 2010.
2. BUSINESS COMBINATIONS
Acquisition of Language Weaver Inc.
On 23 July 2010 the Group acquired 100% of the share capital of
Language Weaver Inc., an unlisted company based in the United
States of America. The principal activity of Language Weaver Inc.
is the provision of Machine Statistical Translation.
The total cost of the combination comprises $41.5 million
(GBP26.9 million) and was funded from the Group's existing cash
resources.
The provisional fair value of the identifiable assets and
liabilities of Language Weaver Inc. Group as at the date of
acquisition were:
Provisional
fair value
Book value to Group
GBP'000 GBP'000
Intangible assets - 8,539
Property, plant and equipment 1,532 1,532
Cash and cash equivalents 1,660 1,660
Trade receivables 1,739 1,739
Other receivables 294 294
Trade payables (63) (63)
Other payables (3,185) (3,185)
Finance lease payables (1,226) (1,226)
Deferred tax liabilities - (2,391)
----------- ------------
Net assets 751 6,899
===========
Provisional Goodwill arising
on acquisition 19,980
------------
26,879
============
All fair values included in the above analysis are provisional
fair values which are based upon management's best estimate at the
date of preparation of the financial statements.
Discharged by: GBP'000
Cash paid to shareholders 26,879
---------
Cash outflow on the acquisition:
Net cash and cash equivalents acquired
with the subsidiary 1,660
Total cash paid (26,879)
---------
Net cash outflow (25,219)
=========
From the date of acquisition Language Weaver Inc. has
contributed GBP4.3 million of revenue and a loss of GBP0.4 million
to the net profit after tax of the Group. If the combination had
taken place at the beginning of the year, the profit after taxation
for the Group would have been GBP19.7 million and revenue from
continuing operations would have been GBP207.0 million. Included in
the GBP20.0 million of goodwill recognised above are certain
intangible assets that cannot be individually separated and
reliably measured from the acquiree due to their nature. The Board
consider that a significant value remains in assembled workforce,
buyer specific synergies and technical expertise.
Acquisition of Xopus B.V.
On 29 June 2010 the Group acquired 100% of the share capital of
Xopus B.V., an unlisted company based in the Netherlands. The
principal activity of Xopus B.V. is the provision of online XML
editing.
The total cost of the combination comprises EUR1.5 million
(GBP1.2 million) and was funded from the Group's existing cash
resources.
The provisional fair value of the identifiable assets and
liabilities of Xopus B.V. as at the date of acquisition were:
Provisional
fair value
Book value to Group
GBP'000 GBP'000
Intangible assets - 510
Property, plant and equipment 18 18
Cash and cash equivalents 298 298
Trade receivables 52 52
Other receivables 14 14
Trade payables - -
Other payables (588) (588)
Deferred tax liabilities - (128)
----------- ------------
Net (liabilities) / assets (206) 176
===========
Provisional Goodwill arising
on acquisition 1,055
------------
1,231
============
All fair values included in the above analysis are provisional
fair values which are based upon management's best estimate at the
date of preparation of the financial statements.
Discharged by: GBP'000
Fair value of contingent consideration 231
Cash paid to shareholders 1,000
--------
Total cash payable 1,231
========
Cash outflow on the acquisition:
Net cash and cash equivalents acquired
with the subsidiary 298
Total cash paid (1,000)
--------
Net cash outflow (702)
========
The maximum contingent consideration is GBP1.6 million. The fair
value has been calculated at GBP0.2 million and under IFRS 3
(revised) any re-measurement will be recognised in the income
statement.
From the date of acquisition Xopus B.V. has contributed GBP0.2
million of revenue and a loss of GBP0.1 million to the net profit
after tax of the Group. If the combination had taken place at the
beginning of the year, the profit for the Group would have been
GBP22.0 million and revenue from continuing operations would have
been GBP203.7 million. Included in the GBP1.0 million 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 assembled workforce.
3. SEGMENT INFORMATION
The Group operates in the Global Information Management
industry. For management purposes the Group is organised into
business units based on their products and services and has three
reportable operating segments as follows:
-- The Language Services segment is the provision of a
translation service to customer's multilingual content in multiple
languages.
-- The Language Technologies segment is the sale of enterprise,
desktop and statistical machine translation technology developed to
help automate and manage multilingual assets together with
associated consultancy and other services.
-- The Content Management Technologies segment is the sale of
content management technologies developed to help automate and
manage content to deliver a consistent, interactive and
personalised customer experience, in multiple languages, across
websites, documentation and channels.
Within the Content Management Technologies segment two operating
segments have been aggregated to form the above reportable
operating segment.
Management monitors the operating results of its business units
separately for the purpose of making decisions about resource
allocation and performance assessment prior to charges for tax,
deferred compensation related to business combinations and
amortisation.
Year ended 31 December 2010
Content Adjustments
Language Language Management and
Services Technologies Technologies eliminations* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
External
revenue 124,646 33,915 44,988 - 203,549
Internal
revenue - - - -
--------- ------------- ------------- -------------- --------
Total revenue 124,646 33,915 44,988 - 203,549
Depreciation 1,351 740 470 - 2,561
Segment
profit
before tax
and
amortisation 25,178 3,321 7,655 (759) 35,395
--------- ------------- ------------- --------------
Amortisation (6,587)
--------
Profit before
tax 28,808
--------
*Deferred compensation relating to acquisitions
Year ended 31 December 2009
Content Adjustments
Language Language Management and
Services Technologies Technologies eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
External
revenue 109,612 29,103 33,163 - 171,878
Internal
revenue - - - -
--------- ------------- ------------- ------------- --------
Total revenue 109,612 29,103 33,163 - 171,878
Depreciation 1,142 346 492 - 1,980
Segment
profit
before tax
and
amortisation 19,842 3,535 6,444 - 29,821
--------- ------------- ------------- -------------
Amortisation (5,808)
--------
Profit before
tax 24,013
--------
Unallocated assets include cash, loans and taxation.
Segment assets:
Content Adjustments
Language Language Management and
Services Technologies Technologies eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segments
assets:
At 31
December
2010 53,934 87,280 76,512 (1) 53,929 271,655
========== ============= ============= ============= ========
At 31
December
2009 48,266 58,312 76,324 (2) 52,783 235,685
========== ============= ============= ============= ========
(1) Segment assets do not include cash (GBP46,628,000),
Corporation Tax (GBP945,000) and Deferred Tax (GBP6,356,000).
(2) Segment assets do not include cash (GBP46,160,000),
Corporation Tax (GBP1,002,000) and Deferred Tax (GBP5,621,000).
Geographical analysis of external revenues by country of
domicile is as follows:
2010 2009
GBP'000 GBP'000
UK 48,524 51,662
USA 52,225 31,350
Republic of Ireland 21,313 22,456
Netherlands 15,638 11,616
Belgium 14,927 14,888
Germany 14,257 13,146
Canada 12,636 10,541
Rest of World 24,029 16,219
-------- --------
203,549 171,878
======== ========
Geographical analysis of non-current assets excluding deferred
tax is as follows:
2010 2009
GBP'000 GBP'000
UK 121,805 129,138
USA 40,112 11,442
Rest of World 4,614 2,868
-------- --------
166,531 143,448
======== ========
Goodwill and intangibles recognised on consolidation are
included in the country which initially acquired the business
giving rise to the recognition of goodwill and intangibles.
4. OTHER REVENUE AND EXPENSES
Group operating profit is stated after charging/(crediting):
2010 2009
GBP'000 GBP'000
Included in administrative expenses:
Research and development expenditure 13,637 11,043
Bad debt (credit)/ charge (117) (374)
Depreciation of property, plant and equipment
- owned assets 2,356 1,980
Depreciation of property, plant and equipment
- leased assets 205 -
Amortisation of intangible assets 6,587 5,808
Operating lease rentals for plant and machinery 664 912
Operating lease rentals for land and buildings 5,424 5,636
Operating lease rentals received for land
and buildings - (75)
Net foreign exchange (gains) / losses (1,204) 838
Loss/ (gain) on derivatives 38 (352)
The net foreign exchange (gains) / 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,
and the retranslation of US Dollar and Euro denominated loans.
5. INCOME TAX
(a) Income tax on profit:
Consolidated income statement
2010 2009
GBP'000 GBP'000
Current taxation
UK Income tax charge
Current tax on income for the period 1,188 1,755
Adjustments in respect of prior periods 177 -
Underlying Foreign Tax Credit 197 -
--------- ---------
1,562 1,755
--------- ---------
Foreign tax
Current tax on income for the period 7,906 4,714
Adjustments in respect of prior periods (434) 123
--------- ---------
7,472 4,837
--------- ---------
Total current taxation 9,034 6,592
========= =========
Deferred income taxation
Origination and reversal of temporary differences (2,342) (532)
Adjustments in respect of prior periods 72 -
Total deferred income tax (2,270) (532)
========= =========
Tax expense (see (b) below) 6,764 6,060
========= =========
Consolidated statement of other comprehensive income
2010 2009
GBP'000 GBP'000
Current taxation
UK Income tax
Income tax benefit on currency translation
differences on foreign currency equity loans
to foreign subsidiaries 90 847
--------- ---------
Total current taxation 90 847
========= =========
A tax credit in respect of share based compensation for current
taxation of GBP557,000 (2009: credit of GBP635,000) has been
recognised in the statement of changes in equity in the year. A tax
credit in respect of share based compensation for deferred taxation
of GBP342,000 (2009: debit of GBP220,000) has been recognised in
the statement of changes in equity in the year.
(b) Factors affecting tax charge:
The tax assessed on the profit on ordinary activities for the
year is lower than the standard rate of income tax in the UK of 28%
(2009: 28%). The differences are reconciled below:
2010 2009
GBP'000 GBP'000
Profit on ordinary activities before tax 28,808 24,013
--------- ---------
Profit on ordinary activities at standard
rate of tax in the UK 28% (2009: 28%) 8,066 6,724
Expenses not deductible for tax purposes 928 191
Non deductible amortisation of intangibles 125 -
Non taxable income - -
Adjustments in respect of previous years (185) 123
Utilisation of tax losses brought forward
previously not recognised (2,932) (521)
Current tax losses not available for offset 416 147
Effect of overseas tax rates (73) (532)
Other 419 (72)
Tax expense (see (a) above) 6,764 6,060
========= =========
6. EARNINGS PER SHARE
The calculation of basic earnings per ordinary share is based on
a profit after tax of GBP22,044,000 (2009: GBP17,944,000) and
77,640,587 (2009: 76,200,428) 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 2010 the diluted ordinary
shares were based on 80,320,829 ordinary shares that included
2,680,242 potential weighted number of options.
The following reflects the income and share data used in the
calculation of adjusted earnings per share computations:
2010 2009
GBP'000 GBP'000
Profit for the year 22,044 17,944
Amortisation of intangible fixed assets 6,587 5,808
Less: tax benefit associated with the amortisation
of intangible fixed assets (1,693) (1,620)
-------- --------
Adjusted profit for the year 26,938 22,132
======== ========
2010 2009
No. No.
Weighted average number of ordinary shares
for basic earnings per share 77,640,587 76,200,428
Effect of dilution resulting from share options 2,680,242 2,535,727
----------- -----------
Weighted average number of ordinary shares
adjusted for the effect of dilution 80,320,829 78,736,155
=========== ===========
2010 2009
Adjusted earnings per ordinary share - basic
(pence) 34.70 29.05
Adjusted earnings per ordinary share - diluted
(pence) 33.54 28.11
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
Customers Property Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost:
At 1 January 2009 7,212 45,225 119,866 172,303
Acquisition of subsidiaries 2,712 2,073 10,393 15,178
Adjustment to deferred tax
asset - - (429) (429)
Currency adjustment (569) (3,277) (7,148) (10,994)
---------- ------------- --------- ---------
At 1 January 2010 9,355 44,021 122,682 176,058
Acquisition of subsidiaries 1,840 7,209 21,035 30,084
Currency adjustment (77) (735) (1,340) (2,152)
---------- ------------- --------- ---------
At 31 December 2010 11,118 50,495 142,377 203,990
========== ============= ========= =========
Amortisation:
At 1 January 2009 (2,677) (19,198) (12,203) (34,078)
Provided during the year (1,225) (4,583) - (5,808)
Currency adjustment 244 1,208 - 1,452
----------
At 1 January 2010 (3,658) (22,573) (12,203) (38,434)
Provided during the year (2,081) (4,506) - (6,587)
Currency adjustment 51 285 - 336
---------- ------------- --------- ---------
At 31 December 2010 (5,688) (26,794) (12,203) (44,685)
========== ============= ========= =========
Net book value:
At 31 December 2010 5,430 23,701 130,174 159,305
==========
At 1 January 2010 5,697 21,448 110,479 137,624
========== ============= ========= =========
In 2009, an adjustment of GBP429,000 was made to goodwill in
respect of a deferred tax asset not recognised at the date of the
Trados acquisition utilised during the year.
Customers and intellectual property are 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.
8. 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:
2010 2010 2009 2009
No. WAEP No. WAEP
Outstanding at the beginning
of the year 2,002,040 GBP2.11 2,617,889 GBP2.03
Granted during the year 235,851 GBP4.73 340,940 GBP2.91
Forfeited during the year (143,712) GBP3.27 (494,500) GBP3.21
Exercised during the year (705,962) GBP2.23 (462,289) GBP1.12
Expired during the year (12,230) GBP2.30 - -
---------- ----------
Outstanding at the end of
the year 1,375,987 GBP2.37 2,002,040 GBP2.11
========== ==========
Exercisable at 31 December 769,565 GBP1.47 1,170,756 GBP1.56
The weighted average share price at the date of exercise for the
options exercised is GBP4.88 (2009: GBP3.41).
For the share options outstanding as at 31 December 2010, the
weighted average remaining contractual life is 5.94 years (2009:
3.66 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:
2010 2009
Weighted average share price (pence) 473 303
Weighted average fair value at grant date (pence) 203 110
Expected volatility 47% 45%
Expected option life 4 years 4 years
Expected dividends 1% 0-1%
Risk-free interest rate 2% 2%
The range of exercise prices for options outstanding at the end
of the year was GBP0.34-GBP5.48 (2009: GBP0.01-GBP3.745).
2010 2009
Date of Grant Exercise Period Number Number
----------- ------------------ ---------------- ---------- ----------
GBP0.01 - 10 years after
GBP0.50 23/02/03 grant date 46,000 50,000
----------- ------------------ ---------------- ---------- ----------
GBP0.51 - 10 years after
GBP1.00 26/09/01-12/12/03 grant date 173,270 299,747
----------- ------------------ ---------------- ---------- ----------
GBP1.01 - 10 years after
GBP1.50 02/04/04-04/04/05 grant date 345,034 485,116
----------- ------------------ ---------------- ---------- ----------
GBP1.51 - 10 years after
GBP2.00 07/04/01 grant date 2,250 3,000
----------- ------------------ ---------------- ---------- ----------
GBP2.01 - 10 years after
GBP2.50 22/03/06-03/10/06 grant date 29,375 119,570
----------- ------------------ ---------------- ---------- ----------
GBP2.51 - 10 years after
GBP3.00 28/02/08-2/3/09 grant date 522,638 821,390
----------- ------------------ ---------------- ---------- ----------
GBP3.01 - 10 years after
GBP3.50 12/05/00-1/6/00 grant date - 12,250
----------- ------------------ ---------------- ---------- ----------
GBP3.51 - 10 years after
GBP4.00 23/5/07 grant date 47,250 210,967
----------- ------------------ ---------------- ---------- ----------
GBP4.51 - 10 years after
GBP5.00 12/04/10 grant date 168,163 -
----------- ------------------ ---------------- ---------- ----------
GBP5.01 - 10 years after
GBP5.50 10/09/10 grant date 42,007 -
----------- ------------------ ---------------- ---------- ----------
Total 1,375,987 2,002,040
----------- ------------------ ---------------- ---------- ----------
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 year ended 31 December 2010.
2010 2009
Expected volatility 47% 45%
Weighted average fair value at grant date (pence) 402 238
Expected life 3 years 3 years
Expected dividends 1% 0-1%
Risk-free interest rate 1.4% -2% 2%
2010 2010 2009 2009
No. WAEP No. WAEP
Outstanding at the beginning
of the year 2,233,838 - 1,937,158 -
Granted during the year 730,314 - 1,187,115 -
Exercised during the year (288,140) - (831,357) -
Forfeited during the year (99,096) - (59,078) -
----------
Outstanding at the end of the
year 2,576,916 - 2,233,838 -
========== ==========
Exercisable at 31 December Nil - Nil -
All LTIPs are exercisable at nil cost to the individual (with
the exception of the 1p nominal value of each share awarded).
SDL Save As You Earn Scheme (SAYE)
The table below sets out the number and weighted average
exercise prices (WAEP) of, and movements in, the SDL Save As You
Earn Scheme during the year:
2010 2010 2009 2009
No. WAEP No. WAEP
Outstanding at the beginning
of the year 184,216 - 169,810 -
Granted during the year - - 32,099 -
Exercised during the year - - (3,243) -
Forfeited during the year (20,566) - (14,450) -
---------
Outstanding at the end of the
year 163,650 - 184,216 -
========= =========
Exercisable at 31 December Nil - Nil -
For the SAYE shares outstanding as at 31 December 2010, the
weighted average remaining contractual life is 1.37 years (2009:
2.32 years).
The fair value of equity settled share options granted under the
SDL SAYE Scheme is estimated as at the date of grant using the
Black Scholes model. The following table lists the inputs to the
model in the year of grant:
2009
Weighted average share price (pence) 261
Expected volatility 45%
Expected option life 3.5 years
Expected dividends 0-1%
Risk-free interest rate 2%
9. ADDITIONAL CASH FLOW INFORMATION
Analysis of group net debt:
Debt 31
1 January Acquired on Exchange December
2010 Cash flow acquisition differences 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and
cash
equivalents 46,160 333 - 135 46,628
Loans - - - - -
---------- ---------- ------------ ------------ -----------
46,160 333 - 135 46,628
========== ========== ============ ============ ===========
Debt 31
1 January Acquired on Exchange December
2009 Cash flow acquisition differences 2009
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and
cash
equivalents 31,227 17,031 - (2,098) 46,160
Loans - - - - -
31,227 17,031 - (2,098) 46,160
========== ========== ============ ============ ===========
10. POST STATEMENT OF FINANCIAL POSITION EVENTS
There are no known events occurring after the date of the
Statement of Financial Position that require disclosure. The
Directors are recommending that a final dividend for the year ended
31 December 2010 of 5.5 pence per ordinary share be paid to the
shareholders whose names appear on the register at the close of
business on 6 May 2011 with payment on 3 June 2011. The ex-dividend
date will be 4 May 2011. This recommendation will be put to the
shareholders at the Annual General Meeting.
11. POST PERIOD END CHANGES TO THE BOARD
On 17 January 2011, SDL announced several changes to the Board
as part of a carefully planned succession process that brings
absolute clarity to the future board structure of SDL.
Mr. John Hunter, Chief Financial Officer of SDL, was appointed
to the role of Chief Executive Officer with effect from 1 February
2011 with Mr. Mark Lancaster, retaining his role as Executive
Chairman.
Mr. Matthew Knight has been appointed Chief Financial Officer
replacing John Hunter and will join SDL towards the end of April
2011. Mr Knight is currently employed by Logica plc, where he is
Chief Financial Officer for Northern & Central Europe and is a
member of the Institute of Chartered Accountants of England and
Wales.
Mrs. Cristina Lancaster will leave the board at the end of March
2011 but will continue to work in SDL in a part-time position
supporting the Chief Information Officer, Mark Reid, on internal
systems development and strategy utilising her considerable
knowledge and experience of the company.
At the same time, SDL also announced its intention to further
strengthen the board in 2011 with the appointment of at least one
additional Independent Director.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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