TIDMSDL
RNS Number : 0045L
SDL PLC
06 August 2013
6 August 2013
SDL PLC
Interim results for the six months ended 30 June 2013
A period of significant transformation, enhancing our
capabilities to deliver solutions for Customer Experience
Management
SDL plc ("SDL", "the Group" or the "Company"), a leader in
Customer Experience Management solutions, announces its unaudited
interim results for the six months ended 30 June 2013.
Unaudited Unaudited
6 months 6 months
to to
30 June 30 June
2013 2012
GBP'000 GBP'000
Income Statement:
Revenue 130,956 133,573
Profit before tax, amortisation
of intangible assets and one-off
costs relating to 2005 litigation 2,812 20,775
(Loss)/ profit before tax (2,314) 16,351
Earnings per ordinary share -
basic (pence) (1.74) 15.63
Adjusted earnings per ordinary
share - basic (pence) 1.91 19.57
Statement of Financial Position:
Total equity 231,512 223,068
Cash and cash equivalents 20,584 16,717
Interest bearing loans and borrowings (20,000) (22,190)
Operational Summary:
-- Performance in line with revised outlook
-- Revenue performance across the four segments (underlying constant currency):
o Content Management Technologies down 0.7%
o Language Technologies down 9.0%
o Global Solutions (formerly Language Services) down 3.2%
o Campaign Management, Analytics & Social Intelligence down
15.3%
-- Geographically, headline growth in Continental Europe up 4%,
Americas and Asia Pacific down 6% and 4% respectively
-- New customer wins in the period include: Tekla Corporation,
Edwards Life Sciences, Bank of Finland, Amalgamated Banks of South
Africa, Provident Insurance plc and Amerigroup Corporation
-- Several key product launches further strengthened SDL's
leadership in Customer Experience Management
-- Completed strategically important acquisition of Bemoko, a
mobile solution extending SDL's Customer Experience Management
offering
-- Progress made to strengthen SDL's executive team, through appointments of:
o Chief Marketing Officer
o Global Head of HR
-- Our transformation programme remains on track and we are
making headway to deliver a more robust platform for future growth
adding 85 new (65 net) sales and marketing staff
Mark Lancaster, Chief Executive Officer, commented:
"Although investments are taking longer to deliver bookings
growth than originally anticipated, we are starting to see pipeline
improvements on both the technology and services side. We expect to
benefit from cost savings following systems investments and
substantial structural improvements in the latter half of the
calendar year, with a more pronounced impact in 2014.
"We are taking a cautious view for the remainder of this
financial year on the speed of recovery in Services volume and
Technology licence sales growth. We believe the investments we are
making to address future business opportunities will unlock the
intrinsic value within SDL to deliver our technology products and
services. As we enter the second half, our guidance for 2013
remains unchanged and the Board remains confident in the Company's
strategy and ability to deliver shareholder value in the longer
term."
For further information please contact:
SDL plc Tel: 01628 410 127
David Clayton, Chairman
Mark Lancaster, Chief Executive Officer
Matthew Knight, Chief Financial Officer
FTI Consulting Tel: 020 7831 3113
Edward Bridges / Jon Snowball / Emma
Appleton
About SDL
SDL enables global businesses to enrich their customers'
experience through the entire customer journey. SDL's technology
and services help brands to predict what their customers want and
engage with them across multiple languages, cultures, channels and
devices.
SDL has over 1,500 enterprise customers, 400 partners and a
global infrastructure of 70 offices in 38 countries. 42 out of the
top 50 brands work with SDL. For more information, visit
www.sdl.com.
All trademarks are the property of their respective owners.
Chairman's Statement
I am pleased to submit my first report to shareholders since
taking over as Chairman of SDL at the beginning of July. The Group
has clearly made great strides during the period to strengthen the
Executive team and to scale its sales and marketing capabilities,
which has improved the pipeline for both the services and
technology businesses. I am looking forward to continuing to
provide consistent and stable board leadership that will enable us
to build on that success.
Having joined the Board as a Non-executive Director in December
2009 and been Senior Independent Director (SID) since April 2012 I
bring an in-depth knowledge of the Group's mission, vision and
values, and will continue to work closely with Mark Lancaster,
Chief Executive Officer, and the SDL Board to achieve our
goals.
Trading
The first half of 2013 has been a challenging period, with a
combination of market conditions, legacy sales and marketing issues
and planned investments resulting in a profit before tax,
amortisation and one-off historic litigation costs for the period
of GBP2.8 million (2012: GBP20.8 million) and a loss before tax of
GBP2.3 million (2012: profit of GBP16.4 million). Whilst below last
year, performance was in line with the revised outlook provided in
the Trading Update of 18 June 2013.
The business has already made substantial structural
improvements that include the hiring of a Chief Marketing Officer,
a Global Head of Human Resources and 65 new sales and marketing
staff. Some key product launches, particularly in the Content
Management Technologies and Campaign Management, Analytics and
Social Intelligence segments, have further strengthened SDL's
leadership in Customer Experience Management.
Governance and the Board
We have an experienced and diverse Board, supported by a strong
executive team. We are working hard to put in place effective
succession and development programmes and this will continue to be
an important area of focus for me. We expect to further strengthen
our capabilities in both areas in the coming months.
The Company is run in an open and transparent manner, consistent
with its stated values. Effective governance means managing our
business well and engaging well with our stakeholders. It is never
simply an exercise in compliance, but a key element underpinning
the long-term growth of our business. As such, it is of key
importance in these recent challenging times.
I chair the Board at a critical stage in the Group's
development. Having made significant investments in acquisitions in
recent times, it has been imperative that we invest in our existing
infrastructure to fully exploit the value of those acquisitions. I
am confident the Group will continue to benefit from its continued
commitment to research and development, clear, well executed
operational plans and strong management. The Board remains
confident in the Group's strategy and ability to deliver
shareholder returns in the longer term.
David Clayton
Chief Executive Officer's statement
Summary Performance
The Group's performance in the first half was in-line with the
Board's revised expectations. Revenues were GBP131.0 million (2012:
GBP133.6 million). Profit before taxation, amortisation of
intangible assets ("PBTA") and Trados litigation costs of GBP1.3
million was GBP2.8 million (2012: GBP20.8 million). The decrease is
due to the planned additional sales and marketing investments
incurred in the first half of 2013 of GBP6.3 million and weaker
revenue performance. Gross cash in the business at the half year
was GBP20.6 million (31 December 2012: GBP28.5 million) and net
cash after borrowings was GBP0.6 million (31 December 2012: GBP6.3
million).
Headline revenue decreased by 2.0%, attributable to an organic
reduction of 4.4%, and foreign currency and acquisition effects of
+0.8% and +1.6% respectively. Geographically, revenue growth in
Continental Europe was strongest at +4%. Revenue was down on the
prior year in the Americas at -6% and Asia Pacific at -4% and up in
the UK at +1%.
The cash generated from operations was GBP9.5 million, an
improvement of GBP2.5 million, reflecting stronger working capital
management during the period. Capital expenditure was GBP5.1
million (2012: GBP2.4 million) due to increased investment in SaaS
cloud infrastructure. Tax paid was GBP4.8 million (2012: GBP4.2
million), above the profit and loss tax charge due to prior year
taxes and the deferred tax credit for intangible asset
amortisation.
With regard to the ongoing Trados litigation, the Board will
continue to monitor the situation. A Delaware court judgement is
imminently expected and shareholders will be kept informed of
material developments.
At the start of the year, the Group embarked on a major sales
and marketing investment programme to achieve a step change in
sales and marketing execution capacity and to capitalise on our
technology portfolio, providing businesses with solutions for
Customer Experience Management. The Group remains focused on
strategic investments for the future of the business.
Key wins in the period include Tekla Corporation, Edwards Life
Sciences, Bank of Finland, Amalgamated Banks of South Africa,
Provident Insurance plc and Amerigroup Corporation. CXM deals
include Bose Europe, Wolters Kluwer and eBay.
First Half Investment Programme Highlights include:
-- Planned hiring milestones for sales and marketing have been
achieved, with the recruitment of 65 additional sales and marketing
resources across Europe and North America. With the resources now
in place, we expect to see the impact of these investments in the
second half of 2013, as per our plan.
-- We have strengthened the executive team with the appointment
of Grant Johnson, formally from Pegasus Systems, into the position
of Chief Marketing Officer and Roddy Temperley as Global Head of
Human Resources, who came to us from Credit Suisse and prior to
that SAP.
-- We made significant investments in our technology platform
throughout 2012 to create an integrated technology platform which
we showcased at SDL Innovate. Released components of this platform
in 2013 were
Social Intelligence Customer Commitment Framework
Freetranslation.com, our integrated machine and human
translation platform
Integrated Marketing suite with new architecture and scale
capabilities
Media Manager enterprise edition
-- In Global Solutions (formerly Language Services), new
workflow efficiency technology and process improvements. This is
ahead of schedule and we expect to deliver considerable savings in
Q4 2013.
-- Sales, marketing and systems infrastructure investments are
being made to deliver SDL's technology products and services into
the Customer Experience Management market.
-- IT infrastructure in Human Resource and Financial
Consolidation systems as well as increased IT infrastructure for
Machine Translation, Internal Systems and Data centres.
-- Most importantly we are seeing pipeline improvement on both
the technology and services side with licence bookings expected to
increase significantly in the second half.
-- The cost of this programme remains on target at GBP10 million in 2013.
Performance by Segment
The Group is organised into business units based on products and
services, and has four reportable segments.
Content Management Technologies(contributing GBP29.3 million or
22% revenue to the Group and GBP1.8 million PBTA) (2012:
contributing GBP28.7 million or 21% revenue to the Group and GBP5.2
million PBTA).
This segment includes Web Content Management Solutions,
eCommerce Technologies and Structured Content Technologies. Total
segment revenues grew by +2.2%, attributable to an organic
reduction of -0.7%, foreign currency effects of +0.9% and the
acquisition impact of the Alterian Web Content business of +2.0%.
Licence revenue increased by 3% in the period, reflecting
significantly improved performance in Structured Content
Technologies partly offset by weaker Web Content Management. Demand
in eCommerce was strong, with revenue growth of 24% in the period.
PBTA margin was 6.0% (2012: 18.0%), the like-for-like fall
reflecting the significant planned investments across all regions
to expand sales and marketing, partnership and alliance management
and customer account management.
During the period, we made a small but strategically significant
acquisition of Bemoko, a UK Company in the Mobile Web Solutions
space. This technology enhances the Group's existing capabilities
to provide an improved delivery tier for web content to any device,
enabling Customer Experience solutions to be individually tailored
around the types of content that customers want when they are
mobile.
We have continued to invest in SDL's Global Multinational
Alliances and Partners programme to promote Customer Experience
Management solutions with other leading design, consulting or
technology organisations, including Sapient, Capgemini and
HintTech. Building on business already developed through this
programme, partnerships and alliances are expected to contribute an
increasing share of future revenues.
Forrester Research has once again acknowledged SDL as a leader
in Web Content Management for Digital Customer Experience, and we
are particularly pleased to have achieved the highest score in both
the Experience Management and Current Offering categories,
affirming SDL's vision and technology leadership.
Language Technologies (contributing GBP17.9 million or 14%
revenue to the Group and a PBTA loss of GBP-2.1 million) (2012:
contributing GBP19.5 million or 15% revenue to the Group and PBTA
of GBP1.9 million).
This segment includes Desktop products, Language Technology
Enterprise Products and Machine Translation. Total segment revenues
were behind 2012 by -8.4%, following an organic decline of -9.0%
and foreign exchange effects of +0.6%. The PBTA loss was -11.5%
(2012: profit of 9.7%), due to a combination of reduced software
licence sales, a reduction in US Government revenues and planned
investment in sales and marketing associated with Machine
Translation technologies.
A number of new SDL BeGlobal translation productivity customers
have been won in the first half, which has contributed towards more
than doubling the number of SaaS units sold for this product.
Global Solutions (contributing GBP73.4 million or 56% of Group
revenue and GBP6.9 million PBTA) (2012: contributing GBP75.2
million or 56% of Group revenue and GBP14.2 million of PBTA).
Total segment revenues reduced by -2.4%, attributable to an
organic reduction of -3.2% and foreign currency effects of +0.8%.
This is primarily due to the poor macroeconomic climate, which has
led to some repeat customers reducing their volumes. No increased
pricing pressure has been experienced.
We continue to invest in improving our infrastructure, including
expanding the use of automated translation technology, new workflow
efficiency tooling and other productivity improvement projects.
Adoption of the Intelligent Machine Translation (iMT) solution
across the customer base has increased from 16% to 20%. Linked to
these initiatives, during the period we have grown our presence in
Poland and India by approximately 60 heads. We have also
established a new translation network office in Ho Chi Minh in
Vietnam, leveraging the established presence of a technology
division in this country.
Campaign Management, Analytics & Social Intelligence
(contributing GBP10.4 million or 8% of Group revenue and a PBTA
loss of GBP-3.8 million) (2012: contributing GBP10.2 million or 8%
of Group revenue and GBP0.2 million PBTA).
This segment comprises marketing analytics, campaign management
and social intelligence technologies, the main components of the
2012 Alterian acquisition.
Software licence bookings and revenue in the period have
resulted in an organic decline in total segment revenues of -15.3%,
with acquisition effects of +16.4% and foreign currency effects of
+1.2% resulting in overall growth of +2.3%. PBTA margin was -36.5%
(2012: 2.4%), having made significant planned investments in sales
and marketing and software development.
During the period we released the SDL Intelligent Marketing
Suite which includes our core analytics, campaign and email
management as a single integrated platform, to enable marketers to
build entire campaign strategies based on individual customer
journeys, tailored to the unique factors influencing their markets.
This platform includes sophisticated in-built integrations with
other SDL products including SDL Tridion web content management and
SDL Media Manager for the deployment of video and other rich media
content. 20 customers are already live on the new product following
the launch in March 2013.
We released the SDL Customer Commitment Dashboard, a predictive
intelligence tool for business leaders wishing to drive Customer
Experience Management programmes. By leveraging captured social
media conversations, and SDL's patented Customer Commitment
Framework, a series of predictive measures are presented in a
simple and intuitive online executive dashboard. This delivers a
near real-time predictive view of customer journey experiences,
enabling organisations to continually optimise their engagement
strategies based upon real customer insights.
Customer Experience Management strategy
The last 12 months have seen considerable consolidation of niche
Content Management, Analytics/Social and marketing businesses, with
a number of the larger players in the Software industry acquiring
similar technology to that of SDL to address the fast evolving
Customer Experience Management market.
We believe SDL is well positioned to address this opportunity,
having acquired similar businesses some years ago, and, over the
last three years, integrated the technology of those businesses
together. While we have lagged behind through lack of marketing and
sales investment and delivery of a holistic sales process and
marketing message, we have been addressing this in 2013. As we move
through the latter part of the year we will not only have the
product, but also the sales and marketing infrastructure to deliver
financial returns. We are very encouraged by the initial direct
market response we have had when showcasing our integrated
technology stack at SDL Innovate as well as direct feedback from
our customers and new prospects. Possibly most importantly, we see
the industry analysts and new prospects as well as the competition
responding well to Customer Experience Management solutions.
Outlook and Current Trading
Sales momentum from the previous year was below our expectations
and investments are taking a little longer to come through than we
anticipated. Our pipeline is increasing as a result of our planned
investments, and we expect to see cost savings on account of
systems and structural investments in the latter half of the
calendar year.
Whilst the Board has taken a more cautious view regarding the
speed of services volume recovery and licence sales growth, the
Board is convinced that making the additional major investments in
sales, marketing and structure will unlock the intrinsic value of
the intellectual property, customer base and infrastructure within
SDL to deliver our technology products and services. We are
confident these investments will not only return SDL to its
historical trends of high growth and consistent profitability, but
will create a Group that will allow us to fully realise our
technology investments.
Our guidance for 2013 remains unchanged and the Board remains
confident in the Group's strategy and ability to deliver
shareholder value.
Mark Lancaster
Chief Executive Officer
SDL plc
6 August 2013
SDL plc
Interim Condensed Consolidated Income Statement
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2013 2012 2012
Notes GBP'000 GBP'000 GBP'000
Continuing Operations
Sale of goods 24,046 23,882 50,815
Rendering of services 106,910 109,691 218,508
---------- ---------- -------------
REVENUE 3 130,956 133,573 269,323
Cost of sales (59,736) (56,560) (117,712)
---------- ---------- -------------
GROSS PROFIT 71,220 77,013 151,611
Administration expenses (73,355) (60,565) (123,934)
---------- ---------- -------------
OPERATING (LOSS) / PROFIT 4 (2,135) 16,448 27,677
OPERATING PROFIT BEFORE
TAX, AMORTISATION AND HISTORIC
LITIGATION COSTS 2,991 20,872 37,296
Amortisation of intangible
assets (3,801) (4,070) (8,120)
Historic litigation costs (1,325) (354) (1,499)
---------- ---------- -------------
OPERATING (LOSS) / PROFIT 4 (2,135) 16,448 27,677
--------------------------------- ------ ---------- ---------- -------------
Finance revenue 33 101 132
Finance costs (212) (198) (412)
(LOSS) / PROFIT BEFORE
TAX (2,314) 16,351 27,397
Tax credit / (expense) 5 920 (3,913) (6,542)
(LOSS) / PROFIT FOR THE
PERIOD (1,394) 12,438 20,855
---------- ---------- -------------
Pence Pence Pence
Earnings per ordinary share
- basic (pence) 6 (1.74) 15.63 26.12
Earnings per ordinary share
- diluted (pence) 6 (1.73) 15.28 25.98
Adjusted earnings per ordinary share (basic and diluted) are
shown in note 6.
SDL plc
Interim Condensed Consolidated Statement of Comprehensive
Income
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
(Loss)/ profit for the period (1,394) 12,438 20,855
---------- ---------- -------------
Currency translation differences
on foreign operations 9,325 (3,307) (6,615)
Currency translation differences
on foreign currency equity loans
to foreign subsidiaries (646) (785) (346)
Income tax benefit on currency
translation differences on foreign
currency equity loans to foreign
subsidiaries 206 150 115
---------- ---------- -------------
Other comprehensive income 8,885 (3,942) (6,846)
---------- ---------- -------------
Total comprehensive income 7,491 8,496 14,009
---------- ---------- -------------
All the total comprehensive income is attributable to equity
holders of the parent Company. A currency translation difference on
a foreign operation may be reclassified to the Income Statement
upon disposal of that operation. There are no other items included
in Other Comprehensive Income that may be reclassified to the
Income Statement in the future.
SDL plc
Interim Condensed Consolidated Statement of Financial
Position
Unaudited Unaudited Audited
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 11,874 9,731 8,837
Intangible assets 240,715 242,952 234,504
Deferred income tax 4,606 7,192 4,395
Rent deposits 1,751 1,116 1,573
258,946 260,991 249,309
---------- ---------- -------------
CURRENT ASSETS
Trade and other receivables 60,640 67,620 64,835
Current tax asset 1,926 1,106 1,206
Cash and cash equivalents 20,584 16,717 28,452
---------- ---------- -------------
83,150 85,443 94,493
---------- ---------- -------------
TOTAL ASSETS 342,096 346,434 343,802
---------- ---------- -------------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (75,081) (73,863) (72,719)
Loans and overdraft (20,000) (22,190) (22,190)
Current tax liabilities (4,200) (12,552) (8,268)
Provisions (474) (534) (1,605)
---------- ---------- -------------
(99,755) (109,139) (104,782)
---------- ---------- -------------
NON CURRENT LIABILITIES
Other payables (2,896) (3,922) (2,072)
Deferred income tax (7,269) (9,334) (8,366)
Provisions (664) (971) (818)
---------- ---------- -------------
(10,829) (14,227) (11,256)
---------- ---------- -------------
TOTAL LIABILITIES (110,584) (123,366) (116,038)
---------- ---------- -------------
NET ASSETS 231,512 223,068 227,764
---------- ---------- -------------
EQUITY
Share capital 802 801 802
Share premium 96,890 96,264 96,747
Retained earnings 109,640 107,804 114,920
Foreign exchange differences 24,180 18,199 15,295
---------- ---------- -------------
TOTAL EQUITY ATTRIBUTABLE
TO EQUITY HOLDERS OF THE
PARENT 231,512 223,068 227,764
---------- ---------- -------------
The Interim Financial Information presented in this Interim
Report was approved by the Board of Directors on 6 August 2013.
SDL plc
Interim Condensed Consolidated Statement of Changes in
Equity
Foreign
Share Share Retained Exchange
Capital Premium Earnings Differences Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2011
(audited) 792 95,875 99,024 22,141 217,832
Profit for the period - - 12,438 - 12,438
Other comprehensive income - - - (3,942) (3,942)
--------- --------- ---------- ------------- --------
Total comprehensive income - - 12,438 (3,942) 8,496
Deferred taxation on share based payments - - (180) - (180)
Tax credit for share options - - 355 - 355
Dividend paid - - (4,638) - (4,638)
Arising on share issues 9 389 - - 398
Share-based payments - - 805 - 805
--------- --------- ---------- ------------- --------
At 30 June 2012
(unaudited) 801 96,264 107,804 18,199 223,068
--------- --------- ---------- ------------- --------
Profit for the period - - 8,417 - 8,417
Other comprehensive income - - - (2,904) (2,904)
--------- --------- ---------- ------------- --------
Total comprehensive income - - 8,417 (2,904) 5,513
Deferred taxation on share based payments - - 422 - 422
Tax credit for share options - - 194 - 194
Arising on share issues 1 483 - - 484
Share-based payments - - (1,917) - (1,917)
--------- --------- ---------- ------------- --------
At 31 December 2012
(audited) 802 96,747 114,920 15,295 227,764
--------- --------- ---------- ------------- --------
Loss for the period - - (1,394) - (1,394)
Other comprehensive income - - - 8,885 8,885
--------- --------- ---------- ------------- --------
Total comprehensive income - - (1,394) 8,885 7,491
Dividend paid - - (4,895) - (4,895)
Arising on share issues - 143 - - 143
Share-based payments - - 1,009 - 1,009
--------- --------- ---------- ------------- --------
At 30 June 2013
(unaudited) 802 96,890 109,640 24,180 231,512
--------- --------- ---------- ------------- --------
These amounts are attributable to equity holders of the parent
Company.
SDL plc
Interim Condensed Consolidated Statement of Cash Flows
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
(Loss) / profit before tax (2,314) 16,351 27,397
Depreciation of property,
plant and equipment 2,559 2,046 4,053
Amortisation of intangible
assets 3,801 4,070 8,120
Finance costs 212 198 412
Finance revenue (33) (101) (132)
Share-based payments 1,009 805 (1,112)
(Gain) / loss on disposal
of fixed assets - (5) 6
Gain on disposal of investment - - (740)
Decrease / (increase) in
trade and other receivables 4,103 (5,224) (3,068)
Increase / (decrease) in
trade and other payables
and provisions 215 (7,429) (4,989)
Exchange differences (12) (1,233) (1,672)
-------------------------------------- ---------- ---------- -------------
CASH GENERATED FROM OPERATIONS
BEFORE ONE-OFF ALTERIAN ACQUISITION
RELATED OUTFLOWS 9,540 9,478 28,275
Alterian acquisition related
cash outflows - (2,480) (2,480)
-------------------------------------- ---------- ---------- -------------
CASH GENERATED FROM OPERATIONS 9,540 6,998 25,795
Income tax paid (4,775) (4,186) (8,300)
---------- ---------- -------------
NET CASH FLOWS GENERATED
FROM OPERATING ACTIVITIES 4,765 2,812 17,495
CASH FLOWS FROM INVESTING
ACTIVITIES
Payments to acquire property,
plant and equipment (5,075) (2,373) (5,404)
Receipts from sale of property,
plant and equipment 1 16 13
Payment to acquire subsidiaries (1,421) (69,747) (69,747)
Net cash acquired with subsidiaries 235 571 571
Receipt from sale of available
for sale asset - - 740
Interest received 32 170 199
---------- ---------- -------------
NET CASH FLOWS USED IN INVESTING
ACTIVITIES (6,228) (71,363) (73,628)
SDL plc
Interim Condensed Consolidated Statement of Cash Flows
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
FINANCING ACTIVITIES
Net proceeds from issue of
ordinary share capital 143 398 477
Proceeds from borrowings 20,000 22,190 22,190
Repayment of borrowings (22,190) (1,934) (1,934)
Dividend paid on ordinary
shares (4,895) (4,638) (4,638)
Repayment of finance leases (138) (399) (747)
Interest paid (220) (198) (399)
NET CASH FLOWS (USED IN)/
GENERATED FROM FINANCING
ACTIVITIES (7,300) 15,419 14,949
---------- ---------- -------------
DECREASE IN CASH AND CASH
EQUIVALENTS (8,763) (53,132) (41,184)
---------- ---------- -------------
MOVEMENT IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents
at start of the period 28,452 70,408 70,408
Decrease in cash and cash
equivalents (8,763) (53,132) (41,184)
Effect of exchange rates
on cash and cash equivalents 895 (559) (772)
Cash and cash equivalents
at end of the period 20,584 16,717 28,452
---------- ---------- -------------
SDL plc
Notes to the Interim Condensed Consolidated Financial
Statements
1. Basis of preparation and accounting policies
Basis of preparation
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the EU. The interim condensed consolidated financial
statements for the six months ended 30 June 2013 have been prepared
on a going concern basis in accordance with IAS 34 Interim
Financial Reporting.
As required by the Disclosure and Transparency Rules of the
Financial Services Authority, the condensed set of financial
statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Company's
published consolidated financial statements for the year ended 31
December 2012.
The preparation of condensed consolidated interim financial
statements in conformity with IFRSs requires management to make
judgements, estimates and assumptions that affect the application
of accounting policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances,
the results for which form the basis of making the judgements about
carrying values of assets and liabilities that are not readily
available from other sources. Actual results may differ from these
estimates.
The principal risks and uncertainties were disclosed in the
Group's annual report and financial statements for the year ended
31 December 2012 and remain broadly unchanged. SDL has an
established process both to manage risk and to seek to mitigate the
impact of risk as much as possible should it materialise.
Operational risks include management succession, system
interruption and business continuity, data protection, compliance,
contract management, integration of acquisitions, maintaining
technology leadership and intellectual property. Financial risks
include liquidity, counterparties, interest rates and financial
reporting.
Going Concern
In line with code requirements the Directors have made enquiries
concerning the potential of the business to continue as a going
concern. Enquiries included a review of performance in 2013, 2013
annual plans, a review of working capital including the liquidity
position and a review of current indebtedness levels. The Directors
confirm they have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Given this expectation they have continued to
adopt the going concern basis in preparing the interim financial
statements.
2. Business Combinations
Acquisition of Bemoko Consulting Limited
On 8 February 2013, the Group acquired 100% of the share capital
of Bemoko Consulting Limited, an unlisted company based in the
United Kingdom. The principal activity of Bemoko Consulting Limited
is the provision of mobile solutions.
The total cost of the combination comprises GBP2.2 million of
which GBP1.4 million was funded from the Group's existing cash
resources and GBP0.8 million of contingent consideration will be
settled in shares.
The provisional values of the identifiable assets and
liabilities of Bemoko Consulting Limited as at the date of
acquisition were:
Unaudited
Provisional
fair value
Unaudited to
Book value Group
GBP'000 GBP'000
Intangible assets - 754
Property, plant and Equipment 4 4
Trade receivables 83 83
Other receivables 2 2
Cash and cash equivalents 235 235
Other payables (39) (39)
Deferred tax liabilities - (173)
------------ ------------
Net assets 285 866
============
Provisional goodwill arising on
acquisition 1,315
------------
2,181
============
Discharged by: GBP'000
Cash paid to shareholders 1,421
Fair value of contingent consideration 760
------------
Total consideration 2,181
============
Cash outflow on the acquisition:
Net cash and cash equivalents acquired with
the subsidiary 235
Total cash paid (1,421)
------------
Net cash outflow 1,186
============
The maximum contingent consideration is GBP0.8 million. The fair
value was calculated at GBP0.8 million and under IFRS 3 (revised)
any re-measurement will be recognised in the income statement.
From the date of acquisition, Bemoko Consulting Limited has
contributed GBP0.1 million of revenue and a loss of GBP0.1 million
to the net loss after tax of the Group. If the combination had
taken place at the beginning of the year, the loss for the Group
would have been GBP1.3 million and revenue from continuing
operations would have been GBP131.1 million. Included in the GBP1.3
million of goodwill recognised above are certain intangible assets
that cannot be individually separated and reliably measured from
the acquired business due to their nature. These items include the
assembled workforce.
3. Segment information
The Group operates in the Customer Experience Management
industry. For management purposes, the Group is organised into
business units based on their products and services and has four
reportable operating segments as follows:
-- The Global Solutions (formerly referred to as Language
Services) segment is the provision of a translation service for
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, multiple media and channels.
-- The Campaign Management, Analytics and Social Intelligence
segment is the sale of campaign management, social media monitoring
and marketing analytic technology together with associated
consultancy and services.
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 and
amortisation.
Six months ended 30 June 2013 (unaudited)
Segment
profit /(loss)
before
taxation
External Total and
Revenue Revenue Depreciation amortisation
GBP'000 GBP'000 GBP'000 GBP'000
Global Solutions 73,368 73,368 662 6,903
Language Technologies 17,860 17,860 1,029 (2,054)
Content Management Technologies 29,334 29,334 385 1,755
Campaign Management,
Analytics and Social
Intelligence 10,394 10,394 483 (3,792)
Historic litigation costs - - - (1,325)
Total 130,956 130,956 2,559 1,487
--------- --------- -------------
Amortisation (3,801)
----------------
Loss before taxation (2,314)
================
The following segmental analyses have been restated for historic
litigation costs incurred in the prior year for consistency with
current year presentation.
Six months ended 30 June 2012 (unaudited) - restated
Segment
profit before
taxation
External Total and
Revenue Revenue Depreciation amortisation
GBP'000 GBP'000 GBP'000 GBP'000
Global Solutions 75,217 75,217 437 14,166
Language Technologies 19,482 19,482 915 1,890
Content Management Technologies 28,713 28,713 330 5,157
Campaign Management,
Analytics and Social
Intelligence 10,161 10,161 364 239
Historic litigation costs - - - (354)
Acquisition related costs - - - (677)
--------- --------- ------------- ---------------
Total 133,573 133,573 2,046 20,421
--------- --------- -------------
Amortisation (4,070)
---------------
Profit before taxation 16,351
===============
Twelve months ended 31 December 2012 (audited) - restated
Segment
profit before
taxation
External Total and
Revenue Revenue Depreciation amortisation
GBP'000 GBP'000 GBP'000 GBP'000
Global Solutions 151,047 151,047 1,076 23,222
Language Technologies 39,151 39,151 1,522 3,982
Content Management Technologies 57,790 57,790 624 10,431
Campaign Management,
Analytics and Social
Intelligence 21,335 21,335 831 58
Historic litigation costs - - - (1,499)
Acquisition related costs - - - (677)
--------- --------- ------------- ---------------
Total 269,323 269,323 4,053 35,517
--------- --------- -------------
Amortisation (8,120)
---------------
Profit before taxation 27,397
===============
Segment assets:
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
Global Solutions 59,164 60,931 55,693
Language Technologies 85,892 84,177 83,161
Content Management Technologies 114,114 74,541 113,832
Campaign Management, Analytics
and Social Intelligence 55,810 101,770 57,063
Adjustments and Eliminations (1) 27,116 (2) 25,015 (3) 34,053
----------- ----------- -------------
Total 342,096 346,434 343,802
=========== =========== =============
(1) Segment assets do not include cash (GBP20,584,000),
Corporation Tax (GBP1,926,000) and Deferred Tax (GBP4,606,000).
(2) Segment assets do not include cash (GBP16,717,000),
Corporation Tax (GBP1,106,000) and Deferred Tax (GBP7,192,000).
(3) Segment assets do not include cash (GBP28,452,000),
Corporation Tax (GBP1,206,000) and Deferred Tax (GBP4,395,000).
Revenue by geographical destination was as follows:
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
United Kingdom 16,431 16,302 32,380
Rest of Europe 42,352 40,720 83,809
USA 47,907 51,514 104,149
Canada 8,045 8,155 15,710
Rest of the World 16,221 16,882 33,275
---------- ---------- -------------
130,956 133,573 269,323
---------- ---------- -------------
4. Operating (loss) / profit
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
Is stated after charging
/ (crediting):
Research and development
expenditure 11,616 10,591 21,797
Bad debt charge 259 62 632
Depreciation of owned assets 2,340 1,589 2,943
Depreciation of leased assets 219 457 1,110
Amortisation of intangibles 3,801 4,070 8,120
Operating lease rentals for
plant and machinery 231 413 617
Operating lease rentals for
land and buildings 3,462 3,293 6,580
Net foreign exchange differences 194 (1,375) (1,015)
Share based payment charge
/ (credit) 1,009 805 (1,112)
Historic litigation costs 1,325 354 1,499
5. Taxation
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
UK corporation tax:
UK current tax on income
for the period 53 1,278 1,360
Adjustments in respect of
prior periods - - (518)
53 1,278 842
Foreign tax:
Current tax on income for
the period 440 4,431 6,263
Adjustments in respect of
prior periods 186 326 137
---------- ---------- -------------
626 4,757 6,400
---------- ---------- -------------
Total current taxation 679 6,035 7,242
Deferred taxation:
Origination and reversal
of timing differences (1,599) (2,122) (700)
Total deferred taxation (1,599) (2,122) (700)
---------- ---------- -------------
Tax (income) / expense (920) 3,913 6,542
---------- ---------- -------------
A tax credit in respect of foreign currency translation
differences on foreign currency loans to foreign subsidiaries of
GBP206,000 was recognised in the statement of other comprehensive
income in the six months to June 2013 (June 2012: GBP150,000;
December 2012: GBP115,000).
A tax credit in respect of share based compensation for current
taxation of GBPnil (June 2012: GBP355,000; December 2012:
GBP549,000) has been recognised in the statement of changes in
equity in the period. A tax charge in respect of share based
compensation for deferred taxation of GBPnil (June 2012:
GBP180,000; December 2012: credit of GBP242,000) has been
recognised in the statement of changes in equity in the period.
Due to the requirements of IAS 12, in conjunction with IFRS 2,
the Schedule 23 tax credit for share options exercised and deferred
taxation on unexpired options have partly been recorded in equity.
For the 6 months ended 30 June 2013 this has had no impact on the
effective tax rate (at 30 June 2012: +1.1%; at 31 December
2012:-0.6%).
6. Earnings per share
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
(Loss) / profit for the period
attributable to equity holders
of the parent (1,394) 12,438 20,855
Number Number Number
Basic weighted average number
of shares (million) 80.2 79.6 79.9
Employee share options and
shares to be issued (million) 0.3 1.8 0.4
---------- ---------- -------------
Diluted weighted average
number of shares (million) 80.5 81.4 80.3
---------- ---------- -------------
Adjusted earnings per share:
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2013 2012 2012
GBP'000 GBP'000 GBP'000
(Loss) / profit for the period
attributable to equity holders
of the parent (1,394) 12,438 20,855
Amortisation of intangible
fixed assets 3,801 4,070 8,120
Less: deferred tax benefit
associated with amortisation
of intangible fixed assets (874) (936) (1,868)
---------- ---------- -------------
Adjusted profit for the period
attributable to equity holders
of the parent 1,533 15,572 27,107
---------- ---------- -------------
Number Number Number
Basic weighted average number
of shares (million) 80.2 79.6 79.9
Diluted weighted average
number of shares (million) 80.5 81.4 80.3
Pence Pence Pence
Adjusted earnings per ordinary
share - basic (pence) 1.91 19.57 33.95
Adjusted earnings per ordinary
share - diluted (pence) 1.90 19.13 33.77
7. Dividend per share
Dividends paid in the six months ending 30 June 2013 were
GBP4,894,663 (June 2012: GBP4,637,540; December 2012:
GBP4,637,540). The dividend paid amounted to 6.1 pence per ordinary
share (2012: 5.8 pence per share).
8. Interest-bearing loans
During the period, the Group repaid GBP2.2 million, being the
amount outstanding at 31 December 2012 on the Group's GBP7 million
facility. On 28 June 2013, the Group entered into a new GBP30
million facility with Royal Bank of Scotland replacing the Group's
GBP20 million facility (fully drawn) and the Group's GBP7 million
facility (undrawn). This increases the Group facility by GBP3
million. This new facility expires in September 2015 and the amount
drawn at 30 June 2013 was GBP20 million.
9. Share-based payments
On 17 April 2013, 1,073,436 Long Term Incentive Plan (LTIP)
shares were awarded and 353,331 stock options were awarded to
certain key senior executives and employees of the SDL Group. The
exercise price of the options was 420 pence, representing the mid
market price on the day before grant. On 17 April 2013, 1,137,026
Retention Share Plan (RSP) shares were awarded and will be funded
by purchase through the Group's Employee Benefit Trust. The RSP
shares will vest in two equal tranches over two years on the
anniversary of the grant date, subject to the achievement of
specified Group performance conditions.
10. General notes
The comparative figures for the financial year ended 31 December
2012 are not the Company's statutory accounts for that financial
year. Those accounts have been reported on by the Company's auditor
and delivered to the registrar of companies. The report of the
auditor was (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
11. Events after the statement of financial position date
There are no known events occurring after the statement of
financial position date that require disclosure.
Responsibility Statement by the Management Board
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
For and on behalf of the Board
Matthew Knight
Chief Financial Officer
Independent Review Report to SDL plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2013 which comprises the Interim Condensed
Consolidated Income Statement, Interim Condensed Consolidated
Statement of Comprehensive Income, Interim Condensed Consolidated
Statement of Financial Position, Interim Condensed Consolidated
Statement of Changes in Equity, Interim Condensed Consolidated
Statement of Cash Flows, and the related explanatory notes. We have
read the other information contained in the half-yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA"). Our review
has been undertaken so that we might state to the Company those
matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company
for our review work, for this report, or for the conclusions we
have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the Group are prepared in
accordance with IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with IAS 34Interim Financial
Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2013 is not prepared, in all material respects, in accordance
with IAS 34 as adopted by the EU and the DTR of the UK FCA.
Paul Gresham
for and on behalf of KPMG Audit Plc
Chartered Accountants
15 Canada Square
London
E14 5GL
6 August 2013
This information is provided by RNS
The company news service from the London Stock Exchange
END
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