TIDMSDL
RNS Number : 9546U
SDL PLC
04 August 2015
4 August 2015
SDL PLC
Interim results for the six months ended 30 June 2015
Overall, a solid first half performance
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 2015.
Unaudited Unaudited
6 months 6 months
to to
30 June 30 June
2015 2014
GBPm GBPm
Income Statement:
Revenue 133.9 129.1
Profit before tax and amortisation
of intangible assets 9.3 6.7
Profit before tax 6.0 3.1
Earnings per ordinary share
- basic (pence) 4.76 2.30
Adjusted* earnings per ordinary
share - basic (pence) 8.06 5.71
Statement of Financial Position:
Total equity 194.8 195.4
Cash and cash equivalents 11.2 16.9
Interest bearing loans and
borrowings (3.0) (15.0)
*before amortisation
First half highlights
-- Group revenues GBP133.9m, up 4%
-- Group profit before amortisation and tax ("PBTA") GBP9.3m vs last year of GBP6.7m, up 39%
-- Language Services revenue growth of 4%, with net contribution margin up 5.6%
-- New Language Services clients in the period include Acurian
UK, ADAMA, and Akamai Technologies, Huawei and Mitsubishi
Electric.
-- Technology revenue growth of 3%
-- Technology Annual Recurring Revenue ("ARR") up 1% at constant currency vs December 2014
-- Technology bookings down 6% at constant currency
-- Customers who bought our technology solutions during the
period include Abbott Laboratories, Canon, DAF Trucks NV, RCM
Technologies Inc, Royal Mint and Tetrapak Group.
-- Introduced key innovations including:
o SDL's Digital Experience Accelerator (DXA), designed to reduce
website implementation time from weeks to days, drastically
reducing operating costs
o The next generation of machine translation technology -
("XMT"), a core component of the Language pillar within SDL
Customer Experience Cloud ("CXC")
Mark Lancaster, Chief Executive Officer, commented:
"The Group has delivered a solid first half performance with
strong revenue and profit performance from Language Services, ahead
of our expectations. This area of our business continues to see
strong momentum with a good outlook.
Within our Technology segment ARR has continued to grow, but new
bookings have been disappointing and we have made some proactive
changes within the segment. We expect to see growth for the year as
a whole, as our pipeline converts and our sales force continues to
bed in.
As we enter the second half with a solid pipeline, our
expectations for the Group remain unchanged and the Board remains
confident in the Company's vision, strategy and ability to deliver
shareholder value in the longer term."
For further information please contact:
SDL plc Tel: 01628 410
127
Mark Lancaster, Chief Executive
Officer
Dominic Lavelle, Chief Financial
Officer
FTI Consulting Tel: 020 3727
1000
Edward Bridges / Emma Appleton
About SDL
SDL (LSE: SDL) is the leader in global customer experience. With
a completely integrated cloud solution for content management,
analytics, language and documentation, SDL solves the complexity of
managing your brand's digital footprint as it grows across multiple
languages, cultures, websites, devices and channels.
Seventy-nine of the top 100 global companies trust SDL to help
them create authentic, in-context customer experiences that drive
demand and loyalty. SDL brings your brand to the world, and the
world to your brand. Learn more at SDL.com. Follow SDL on Facebook
and Twitter.
Chairman's Statement
The first six months of 2015 has seen the Group achieve results
in line with our expectations in terms of revenue and ahead of
expectations in terms of profitability. As is normal for a business
such as ours, some parts of our business have performed better than
we expected whilst other parts have disappointed.
Our Language Services business has confirmed its world class
status, not only benefiting from improving market demand but also
leveraging our best in class technology to capitalise on the
opportunities open to us. The result is that in this area of the
business we are achieving better revenue growth than the market at
levels of profitability well in excess of any peer in the
sector.
Within our Technology business, our language technology
offerings continue to achieve good success in the market. However,
our Customer Experience Management ("CXM") related products have
not performed to our expectations. Investors will be aware that we
have made significant investments in both Research and Development
and in Sales and Marketing. Feedback from industry analysts and
customers indicates that our R&D investments have been targeted
well. However, execution issues in Sales suggest that we are yet to
see a good return on investments in this area. Our conclusion is
that this is largely a matter of timing. However, we have made some
proactive changes during the period to our structure which we
believe will contribute to improving sales execution.
The underpinning of the Group's profitability by our Language
offerings has allowed us the opportunity to be patient regarding
timing of delivery by our CXM products. The executive team
continues to work tirelessly to ensure that the Group takes full
advantage of the substantial opportunities our marketplace is
offering us.
David Clayton
Chairman
CEO Review
First half highlights
-- Group revenues GBP133.9m, up 4%
-- Group profit before amortisation and tax ("PBTA") GBP9.3m vs last year of GBP6.7m, up 39%
-- Language Services
o revenue growth of 4%
o gross margin 46.5%, (2014: 44.1%)
o net contribution margin 21.6%, (2014: 16.0%)
-- Technology
o revenue growth of 3%
o Technology Annual Recurring Revenue ("ARR") up 1% at constant
currency vs December 2014
o Technology bookings down 6% at constant currency
o Net loss of GBP7.2m (2014: GBP5.0m)
-- Key innovations
o Introduction of SDL's Digital Experience Accelerator (DXA),
designed to reduce website implementation time from weeks to days,
drastically reducing operating costs
o Introduction of the next generation of machine translation
technology - ("XMT"), a core component of the Language pillar
within SDL Customer Experience Cloud ("CXC")
Summary of first half performance
Overall, the Group has delivered a solid first half performance,
beating our profit and meeting our revenue expectations.
In Language Services, we believe we are taking market share from
our competitors and increasing our margins through a combination of
revenue growth and operational leverage. The demand for our
Language Services offering continues to be driven by strong sector
trends such as the globalisation of products and corporate
strategies alongside increasing international trade and the
multi-channel, multi-lingual marketing and customer services
requirements of corporates. We are able to meet the ever present
requirements of speed, accuracy and cost effectiveness combined
with a deep appreciation of the complexities of running global
businesses to meet the needs of our customers.
In our Technology segment, we have seen increased cross sell and
solid upsell, and ARR has continued to grow, however, we delivered
a disappointing new bookings number that we believe is primarily
due to the time it is taking to bed in our new sales force.
However, the large number of our customers upgrading to our latest
web and campaigns technology was most encouraging. We do still see
companies purchasing point solutions, however reassuringly almost
all are taking account of the CX umbrella solution and ability to
integrate. Our ARR base is solid and we continue to build out our
partner presence.
We have executed a tuning of our sales and marketing
organisation and go to market tactics and, as we move through the
second half of 2015, we will be focusing more on the specific
business needs of the individual sales stakeholders, ensuring
expertise of point solutions within the CX umbrella. We are also
increasing our focus on partners and the development community as
we see customers seeking more help with their CX strategies.
Technology Comment
We continue to lead the world with our language technology
solutions and we see continued momentum with our knowledge base /
document management offering. Although Web has had a disappointing
first half, this has often been shown to be the case in the past
with large transactions. Our eCommerce solutions continue to grow
solidly, albeit a little slower than last year, with much of this
growth coming from new customers. We have been very encouraged by
our success in winning a significant deal for our social product
line. We have seen increased partner engagement and interest in our
customer analytics and campaign products.
Customer Experience Management Market Comment
The market for digital experience platforms continues to heat
up. Industry analysts believe that over the next five years the
digital front office will become a huge investment area and a
massive battleground for customers, partners, and the ecosystem.
This is already happening. The market for digital experience
platforms is simultaneously being disrupted by
Software-as-a-Service (SaaS).
We are seeing an increased need for CX solutions as businesses
move into and navigate the digital world. When we use the
combination of our pre-sales consultancy combined with the right
sales execution and deep understanding of the clients' need, we
win.
Leading Indicators
Leading indicators remain very encouraging for the structural
changes we have put in place over the last two years:
-- Gartner: SDL is positioned in the Leader Quadrant for Web Content Management
-- Language Services is growing well and we believe we are
taking market share from competition
-- Our language technology products are significantly ahead of
anything in the market today and tightly integrated into our CX
platform. According to our partners and customers, language is
becoming one of the most important battle grounds of the digital
market.
-- We currently hold 72 patents on our technology, with most of
these patents grouped in areas of cutting edge research that we
have been investing in over the past five years and are yet to
reach high penetration in the market
-- We have had some solid customer wins across all our product
lines. We enter the second half with a significantly stronger
technology pipeline - much stronger than it was 6 months ago.
Innovation and Product Development
Innovation and customer focus have always been at the heart of
SDL and is the reason we now have a leading integrated CXM
technology platform. We consider language management a crucial
cornerstone in our strategy of becoming a world leading solutions
provider for managing the Global Customer Experience and language
remains a key differentiator for us in this space.
In May we introduced Digital Experience Accelerator, a content
management system as a service designed to allow users to deploy
new micro sites in hours, but scalable being based on our Tridion
web technology. Additionally, the open-source based architecture
can be easily extended with other capabilities by both SDL and its
partners, enabling organisations to deliver powerful customer
experience solutions quicker than ever before.
We have also introduced the next generation of machine
translation technology - ("XMT"), a core component of the Language
pillar within SDL's Customer Experience Cloud. We believe this
technology is an essential tool in bringing down the barriers of
multilingual communication by providing a scalable infrastructure
for the development and rapid deployment of real-time translation
capabilities - a necessity in today's multilingual world.
Deployment of ground-breaking new MT capabilities, including SDL
Language Learning(TM), will bring artificial intelligence to
machine translation through machine learning.
Outlook
As we enter the second half of the financial year, we see
continued strong momentum in Language Services, with an outturn
ahead of our expectations for the half year and a good outlook
expected for the second half. Within the Technology segment, we
expect to see growth for the year as a whole, as our pipeline
converts and our sales force continues to bed in. We expect to see
operating profit growth in line with our expectations as we move
through the second half of 2015.
We remain committed to the vision for the Company which seeks to
leverage the trends in global trade and meet the needs of the
digital world.
Financial Review
Summary Performance
Revenues were GBP133.9 million (2014: GBP129.1 million), up 4%
on the prior year. Profit before taxation and amortisation of
intangible assets ("PBTA") was GBP9.3 million (2014: GBP6.7
million), up 39%.
Gross cash in the business at the end of half year was GBP11.2
million (31 December 2014: GBP22.1 million) and net cash after
borrowings was GBP8.2 million (31 December 2014: GBP13.1
million).
Performance by Segment
The Group has two reportable segments:
Language Services contributing GBP76.1 million or 57% of total
revenue and GBP16.5 million of PBTA (2014: contributing GBP72.9
million or 56% of total revenue and GBP11.7 million of PBTA).
Segment revenue grew by 4% in the period. Revenue growth has
been strongest in the Americas region which grew at 10% as new and
existing customers increased their volumes in the period. The APAC
region also performed strongly in the first half but their growth
has been offset by currency translation movements.
The strong margin performance seen in 2014 has continued into
2015. Gross margins increased to 46.5% in the first half (2014:
44.1%) due to the full benefits of operational initiatives
including expanded use of automated translation technology, new
workflow efficiency tooling and use of low cost production centres
being realised and currency impacts.
Segment PBTA margin increased to 21.6% (2014: 16.0%). The PBTA
margin has been driven by gross margin improvements, tight control
of overheads and currency gains in the first half. The full year
net contribution percentage is expected to revert closer to 20% as
the benefit of currency gains is equalised over the full year.
New Language Services clients in the period include Acurian UK,
ADAMA, and Akamai Technologies, Huawei and Mitsubishi Electric.
Technology contributing GBP57.8 million or 43% of revenue and
losses of GBP7.2 million PBTA (2014: contributing GBP56.2 million
or 44% of revenue and losses of GBP5.0 million PBTA).
Segment revenue increased by 3% in the period, whilst costs rose
in line with planned levels of investment. The performance of the
business in the first half has led to a tuning and refocusing of
its sales, marketing and operations teams to improve performance in
the second half. Key commercial measures for the business in the
first half include:
-- Bookings in the period were GBP51.3 million, a reduction of
6% on 2014 (GBP54.3 million) at constant currency
-- The new bookings pipeline for the second half is healthy in
comparison to forecast new bookings, with the pipeline being
significantly stronger than it was six months ago
-- At the end of June, Annual Recurring Revenue ("ARR") from
SaaS and perpetual support and maintenance contracts was GBP68.7
million, an increase of 1% on December 2014 (GBP68.0 million), at
constant currency
Customers who bought our technology solutions during the period
include Abbott Laboratories, Canon, DAF Trucks NV, RCM Technologies
Inc, Royal Mint and Tetrapak Group.
Cashflow
Cash generated from operations was GBP2.8 million (2014: GBP7.1
million). Compared to 2014, cash conversion in the period has been
impacted by unrealised foreign exchange gains, reduced staff
incentive accruals and increased trade receivables in line with
revenue growth.
Capital expenditure in the period was GBP1.3 million (2014:
GBP1.3 million), tax paid was GBP2.8 million (2014: GBP1.5 million)
and a dividend of GBP2.0m was paid in June 2015 (2014: GBPnil).
Borrowing facilities
In the first half of the year, the Group has repaid a further
GBP6 million of its borrowings. At 30 June 2015, the Group had GBP3
million of drawn borrowings (2014; GBP15 million).
On 3 August 2015 the Group signed a new facility agreement which
provides the Group with a GBP25 million revolving credit facility
and a GBP25 million accordion facility. The facility will expire on
31 July 2020.
Taxation
SDL is a global business and, as such, the Group's effective tax
rate is heavily influenced by the territorial mix of where
operating profits are earned together with the utilisation of tax
losses in certain jurisdictions.
The tax charge for the half year is GBP2.1 million (2014: GBP1.2
million). The effective tax rate of 35% (2014: 39%) includes the
impact of deferred tax on amortisation charged in the period.
Earnings Per Share
Basic earnings per share when adjusted for amortisation of
intangibles ("adjusted EPS") increased by 41% to 8.06 pence. Basic
earnings per share was 4.76 pence (2014: 2.30 pence).
SDL plc
Interim Condensed Consolidated Income Statement
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2015 2014 2014
Notes GBPm GBPm GBP'm
Continuing Operations
Sale of goods 27.8 25.0 50.6
Rendering of services 106.1 104.1 209.8
---------- ---------- -------------
REVENUE 2 133.9 129.1 260.4
Cost of sales (57.8) (56.1) (112.9)
---------- ---------- -------------
GROSS PROFIT 76.1 73.0 147.5
Administrative expenses (70.0) (69.8) (137.8)
---------- ---------- -------------
OPERATING PROFIT 3 6.1 3.2 9.7
OPERATING PROFIT
BEFORE TAX AND AMORTISATION 9.4 6.8 16.8
Amortisation of intangible
assets (3.3) (3.6) (7.1)
OPERATING PROFIT 3 6.1 3.2 9.7
------------------------------ ------ ---------- ---------- -------------
Finance income - - 0.1
Finance costs (0.1) (0.1) (0.4)
---------- ---------- -------------
PROFIT BEFORE TAX 6.0 3.1 9.4
PROFIT BEFORE TAX,
AMORTISATION AND
ONE-OFF COSTS 9.3 6.7 16.5
Amortisation of intangible
assets (3.3) (3.6) (7.1)
PROFIT BEFORE TAX 6.0 3.1 9.4
------------------------------ ------ ---------- ---------- -------------
Tax expense 4 (2.1) (1.2) (2.8)
PROFIT FOR THE PERIOD 3.9 1.9 6.6
---------- ---------- -------------
Pence Pence Pence
Earnings per ordinary
share - basic (pence) 4.76 2.30 8.03
Earnings per ordinary
share - diluted (pence) 4.71 2.28 7.97
Adjusted earnings per ordinary share (basic and diluted) are
shown in note 5.
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
2015 2014 2014
GBPm GBPm GBPm
Profit for the period 3.9 1.9 6.6
---------- ---------- -------------
Currency translation
differences on foreign
operations (12.5) (4.6) (5.3)
Currency translation
differences on foreign
currency equity loans
to foreign subsidiaries 3.1 0.6 4.1
Income tax charge on
currency translation
differences on foreign
currency equity loans
to foreign subsidiaries (0.7) (0.2) (1.1)
---------- ---------- -------------
Other comprehensive income (10.1) (4.2) (2.3)
---------- ---------- -------------
Total comprehensive income (6.2) (2.3) 4.3
---------- ---------- -------------
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
2015 2014 2014
GBPm GBPm GBPm
ASSETS
NON CURRENT ASSETS
Property, plant and
equipment 6.7 8.3 7.4
Intangible assets 194.3 202.1 202.6
Deferred income tax 5.2 5.2 5.3
Rent deposits 1.9 1.5 1.7
208.1 217.1 217.0
---------- ---------- -------------
CURRENT ASSETS
Trade and other receivables 67.0 62.9 69.4
Corporation tax 2.1 4.5 2.3
Cash and cash equivalents 11.2 16.9 22.1
---------- ---------- -------------
80.3 84.3 93.8
---------- ---------- -------------
TOTAL ASSETS 288.4 301.4 310.8
---------- ---------- -------------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (76.0) (73.7) (84.0)
Loans and overdraft (3.0) (15.0) (9.0)
Current tax liabilities (7.3) (7.6) (6.7)
Provisions (2.2) (2.0) (2.8)
---------- ---------- -------------
(88.5) (98.3) (102.5)
---------- ---------- -------------
NON CURRENT LIABILITIES
Other payables (0.8) (1.5) (1.3)
Deferred tax liability (3.7) (5.2) (4.4)
Provisions (0.6) (1.0) (0.5)
---------- ---------- -------------
(5.1) (7.7) (6.2)
---------- ---------- -------------
TOTAL LIABILITIES (93.6) (106.0) (108.7)
---------- ---------- -------------
NET ASSETS 194.8 195.4 202.1
---------- ---------- -------------
EQUITY
Share capital 0.8 0.8 0.8
Share premium 98.5 97.9 97.9
Own shares - (0.3) -
Retained earnings 93.1 86.4 90.9
Foreign exchange differences 2.4 10.6 12.5
---------- ---------- -------------
TOTAL EQUITY ATTRIBUTABLE
TO EQUITY HOLDERS OF
THE PARENT 194.8 195.4 202.1
---------- ---------- -------------
The Interim Financial Information presented in this Interim
Report was approved by the Board of Directors on
.
SDL plc
Interim Condensed Consolidated Statement of Changes in
Equity
Share Share Retained
Capital Premium Own Shares Earnings Translation Reserve Total
GBPm GBPm GBPm GBPm GBPm GBPm
At 31 December 2013
(audited) 0.8 97.4 - 83.5 14.8 196.5
Profit for the period - - - 1.9 - 1.9
Other comprehensive income - - - - (4.2) (4.2)
-------- -------- ------------ --------- ------------------- ------
Total comprehensive income - - - 1.9 (4.2) (2.3)
Own shares acquired - - (0.3) - - (0.3)
Arising on share issues* - 0.5 - - - 0.5
Share-based payments* - - - 1.0 - 1.0
-------- -------- ------------ --------- ------------------- ------
At 30 June 2014
(unaudited) 0.8 97.9 (0.3) 86.4 10.6 195.4
-------- -------- ------------ --------- ------------------- ------
Profit for the period - - - 4.7 - 4.7
Other comprehensive income - - - - 1.9 1.9
-------- -------- ------------ --------- ------------------- ------
Total comprehensive income - - - 4.7 1.9 6.6
Own shares acquired - - 0.3 - - 0.3
Share-based payments* - - - (0.2) - (0.2)
-------- -------- ------------ --------- ------------------- ------
At 31 December 2014
(audited) 0.8 97.9 - 90.9 12.5 202.1
-------- -------- ------------ --------- ------------------- ------
Profit for the period - - - 3.9 - 3.9
Other comprehensive income - - - - (10.1) (10.1)
-------- -------- ------------ --------- ------------------- ------
Total comprehensive income - - - 3.9 (10.1) (6.2)
Dividend paid - - - (2.0) - (2.0)
Arising on share issues* - 0.6 - - - 0.6
Share-based payments* - - - 0.3 - 0.3
-------- -------- ------------ --------- ------------------- ------
At 30 June 2015
(unaudited) 0.8 98.5 - 93.1 2.4 194.8
-------- -------- ------------ --------- ------------------- ------
*These amounts relate to transactions with owners of the Company
recognised directly in equity.
The amounts above are attributable to the equity 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
2015 2014 2014
GBPm GBPm GBPm
Profit before tax 6.0 3.1 9.4
Depreciation of property,
plant and equipment 1.7 2.4 4.7
Amortisation of intangible
assets 3.3 3.6 7.1
Finance income - - (0.1)
Finance costs 0.1 0.1 0.4
Share-based payments 0.3 0.4 0.8
Decrease / (increase)
in trade and other
receivables 3.0 4.5 (2.0)
(Decrease) / increase
in trade and other
payables and provisions (8.7) (7.0) 3.6
Exchange differences (2.9) - (1.7)
---------- ---------- -------------
CASH GENERATED FROM
OPERATIONS 2.8 7.1 22.2
Income tax paid (2.8) (1.5) (3.9)
---------- ---------- -------------
NET CASH FLOWS GENERATED
FROM OPERATING ACTIVITIES - 5.6 18.3
CASH FLOWS FROM INVESTING
ACTIVITIES
Payments to acquire
property, plant and
equipment (1.3) (1.3) (2.4)
Receipts from sale
of property, plant
and equipment - - -
Payment to acquire
subsidiaries (0.3) (0.3) (0.3)
Interest received - 0.1
---------- ---------- -------------
NET CASH FLOWS USED
IN INVESTING ACTIVITIES (1.6) (1.6) (2.6)
SDL plc
Interim Condensed Consolidated Statement of Cash Flows
(continued)
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
FINANCING ACTIVITIES
Net proceeds from issue
of ordinary share capital 0.2 0.4 0.4
Repayment of borrowings (6.0) (5.0) (11.0)
Dividend paid on ordinary
shares (2.0) - -
Repayment of finance
leases (0.2) (0.1) (0.3)
Interest paid (0.1) (0.1) (0.4)
NET CASH FLOWS USED
IN FINANCING ACTIVITIES (8.1) (4.8) (11.3)
---------- ---------- -------------
DECREASE IN CASH AND
CASH EQUIVALENTS (9.7) (0.8) 4.4
---------- ---------- -------------
MOVEMENT IN CASH AND
CASH EQUIVALENTS
Cash and cash equivalents
at start of the period 22.1 18.2 18.2
(Decrease)/ increase
in cash and cash equivalents (9.7) (0.8) 4.4
Effect of exchange
rates on cash and cash
equivalents (1.2) (0.5) (0.5)
Cash and cash equivalents
at end of the period 11.2 16.9 22.1
---------- ---------- -------------
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 2015 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 Conduct Authority, this condensed set of interim
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 2014.
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 2014 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 2015, 2015
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. Segment information
The Group operates in the Customer Experience Management
industry. For management reporting purposes, the Group is organised
into business units based on the nature of their products and
services. Following the completion of the Group's reorganisation in
2014, the Group has two reportable operating segments as
follows:
-- The Language Services segment is the provision of a
translation service for customers' multilingual content in multiple
languages.
-- The Technology segment is the sale of enterprise, desktop and
statistical machine translation technologies, content management
technologies, campaign management, social media monitoring and
marketing analytic technologies together with associated
consultancy and other services.
The Chief Operating Decision Maker 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 2015 (unaudited)
Segment
profit
/(loss)
before
taxation
External Total and
Revenue Revenue Depreciation amortisation
GBPm GBPm GBPm GBPm
Language Services 76.1 76.1 0.5 16.5
Technology 57.8 57.8 1.2 (7.2)
--------- --------- ------------- --------------
Total 133.9 133.9 1.7 9.3
--------- --------- -------------
Amortisation (3.3)
--------------
Profit before taxation 6.0
==============
Six months ended 30 June 2014 (unaudited)
Segment
profit
/ (loss)
before
taxation
External Total and
Revenue Revenue Depreciation amortisation
GBPm GBPm GBPm GBPm
Language Services 72.9 72.9 0.9 11.7
Technology 56.2 56.2 1.5 (5.0)
Total 129.1 129.1 2.4 6.7
--------- --------- -------------
Amortisation (3.6)
--------------
Loss before taxation 3.1
==============
Twelve months ended 31 December 2014 (audited)
Segment
profit
/ (loss)
before
taxation
External Total and
Revenue Revenue Depreciation amortisation
GBPm GBPm GBPm GBPm
Language Services 146.8 146.8 1.6 26.3
Technology 113.6 113.6 3.1 (9.8)
Total 260.4 260.4 4.7 16.5
--------- --------- -------------
Amortisation (7.1)
--------------
Loss before taxation 9.4
==============
Revenue by geographical destination was as follows:
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
United Kingdom 21.6 21.0 40.9
Rest of Europe 39.3 44.1 89.8
USA 47.2 42.6 85.6
Canada 5.8 6.5 12.9
Rest of the World 20.0 14.9 31.2
---------- ---------- -------------
133.9 129.1 260.4
---------- ---------- -------------
3. Operating profit
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
Is stated after charging
/ (crediting):
Research and development
expenditure 14.1 11.4 28.1
Bad debt charge 0.2 0.2 0.3
Depreciation of owned
assets 1.6 2.3 4.5
Depreciation of leased
assets 0.1 0.1 0.2
Amortisation of intangibles 3.3 3.6 7.1
Operating lease rentals
for plant and machinery 0.1 0.3 0.5
Operating lease rentals
for land and buildings 3.3 3.1 6.8
Net foreign exchange
differences (3.0) (0.1) (2.2)
Share based payment
charge 0.5 1.0 1.4
---------- ---------- -------------
4. Taxation
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
UK corporation tax:
UK current tax on income
for the period - 0.4 0.9
Adjustments in respect
of prior periods - 0.3 0.1
---------- ---------- -------------
- 0.7 1.0
---------- ---------- -------------
Foreign tax:
Current tax on income
for the period 2.8 2.8 5.0
Adjustments in respect
of prior periods - (0.1) (0.1)
---------- ---------- -------------
2.8 2.7 4.9
---------- ---------- -------------
Total current taxation 2.8 3.4 5.9
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2015 2014 2014
Deferred taxation: GBPm GBPm GBPm
Origination and reversal
of timing differences (0.7) (2.2) (3.1)
Total deferred taxation (0.7) (2.2) (3.1)
---------- ---------- -------------
Tax expense 2.1 1.2 2.8
---------- ---------- -------------
A tax charge in respect of foreign currency translation
differences on foreign currency loans to foreign subsidiaries of
GBP0.7m was recognised in the statement of other comprehensive
income in the six months to June 2015 (June 2014: GBP0.2m charge;
December 2014: GBP1.1m charge).
A tax credit in respect of share based compensation for deferred
taxation of GBP0.1m (June 2014: GBPnil; December 2014: GBPnil) has
been recognised in the statement of changes in equity in the
period.
5. Earnings per share
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
Profit for the period
attributable to equity
holders of the parent 3.9 1.9 6.6
Number Number Number
Basic weighted average
number of shares (million) 81.0 80.6 80.8
Employee share options
and shares to be issued
(million) 0.9 0.7 0.6
---------- ---------- -------------
Diluted weighted average
number of shares (million) 81.9 81.3 81.4
---------- ---------- -------------
Adjusted earnings per
share:
Unaudited Unaudited
6 months 6 months Audited
to to Year to
30 June 30 June 31 December
2015 2014 2014
GBPm GBPm GBPm
Profit for the period
attributable to equity
holders of the parent 3.9 1.9 6.6
Amortisation of intangible
fixed assets 3.3 3.6 7.1
Less: deferred tax
benefit associated
with amortisation of
intangible fixed assets (0.7) (0.8) (1.4)
---------- ---------- -------------
Adjusted profit for
the period attributable
to equity holders of
the parent 6.5 4.7 12.3
---------- ---------- -------------
Number Number Number
Basic weighted average
number of shares (million) 81.0 80.6 80.8
Diluted weighted average
number of shares (million) 81.9 81.3 81.4
Pence Pence Pence
Adjusted earnings per
ordinary share - basic
(pence) 8.06 5.71 15.10
Adjusted earnings per
ordinary share - diluted
(pence) 7.97 5.66 14.98
6. Dividend per share
Dividends paid in the six months ending 30 June 2015 were
GBP2.0m (June 2014: GBPnil; December 2014: GBPnil). The dividend
paid in 2015 amounted to 2.5 pence per share.
7. Interest-bearing loans
During the period, the Group repaid GBP6.0 million. At 30 June
2015, the Group had a GBP30 million facility with Royal Bank of
Scotland and had drawn down GBP3.0m of the facility. On 3 August
2015 the Group signed a new 5 year facility agreement which
provides the Group with a GBP25 million revolving credit facility
and a GBP25 million accordion facility.
8. Share-based compensation grants
On 17 April 2015 752,255 Long Term Incentive Plan (LTIP) shares
and 517,000 stock options were awarded to certain key senior
executives and employees of the SDL Group. The exercise price of
the options was 444.8 pence, representing the mid-market price on
the day before grant.
On 27 April 2015 280,432 Retention Share Plan (RSP) were awarded
to certain key senior executives and employees of the SDL Group
9. General notes
The comparative figures for the financial year ended 31 December
2014 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.
10. Events after the statement of financial position date
There are no known events occurring after the statement of
financial position date that require disclosure, other than
refinancing the Company's interest bearing loans set out in note
7.
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
Dominic Lavelle
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 2015 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 34 Interim 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 2015 is not prepared, in all material respects, in accordance
with IAS 34 as adopted by the EU and the DTR of the UK FCA.
Simon Haydn-Jones (Senior Statutory Auditor)
For and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
4(th) August 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
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