TIDMSDL
RNS Number : 0695S
SDL PLC
15 March 2016
15 March 2016
SDL PLC
Preliminary results for the year ended 31 December 2015
Revenue and PBTA in-line with management expectations
Operating review concluded
SDL plc ("SDL", "the Group" or the "Company"), a leader in
global content management and language translation software and
services, announces its audited results for the year ended 31
December 2015.
2015 2014
GBPm GBPm
Income Statement:
Revenue 266.9 260.4
Profit before tax, amortisation
of intangible assets and
one-off costs, PBTA 20.6 16.5
(Loss)/profit before tax (25.2) 9.4
Earnings per ordinary share:
basic (pence) (37.93) 8.03
Adjusted earnings per ordinary
share: basic (pence) 16.13 15.10
Highlights
-- Revenue and PBTA in-line with management expectations
-- Revenue GBP266.9 million (2014: GBP260.4 million)
-- Profit before tax, amortisation and one-off costs, PBTA, GBP20.6m (2014: GBP16.5million)
-- Impairment charge of GBP33.3 million; other one-off costs of GBP5.8 million
-- Loss after tax GBP30.7 million (2014: profit after tax GBP6.6 million)
-- Adjusted Earnings per share of 16.13 pence (2014: 15.10 pence)
-- Proposed dividend of 3.1 pence per share (2014: 2.5 pence per
share), reflecting the Board's confidence in the future
-- Language Services trading at record profit levels and high levels of repeat revenues
-- Language Technologies and Global Content Management broadly flat in terms of trading
-- New client wins include Huawei, Mitsubishi Electric, PayPal,
Symantec, Kaspersky Lab, Alfa Laval, Canon, China Airlines, DAF and
Philips Medical Systems
-- Completion of operating review has determined that
Fredhopper, Social Intelligence and Campaign & Analytics
businesses are non-core
Commenting on the results and operational review, David Clayton,
Executive Chairman, said:
"We are pleased to be able to report revenue and PBTA in line
with our recent trading statement. This is a solid achievement
against a background of change within our business.
Following a thorough operational review of the Group's
activities, the Board has concluded that SDL should refocus around
a language centric strategy, helping brands to manage, translate
and deliver localised content on a global scale. As a consequence,
we are now seeking to sell certain non-core elements of our
business."
Commenting on the outlook for SDL, David Clayton, added:
"SDL has a number of significant areas of strength and
opportunities which will form the building blocks of our future
strategy and we will concentrate our investments in these areas. We
have also taken the opportunity to restructure and re-align the
cost base of our ongoing business, incurring one-off costs in order
to position them better for future profitable growth.
In the long term, we are excited by the growth potential for
SDL. In the short term we will continue to drive efficiency within
our business in order to invest in the platforms we need for future
growth. As a result, the Board remain confident of another year of
profit growth."
For further information please contact:
SDL plc Tel: 01628 410
127
David Clayton, Executive
Chairman
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 content management and
language solutions. With more than 20 years of experience, SDL
helps companies build relevant digital experiences that deliver
transformative business results on a global scale. Seventy-nine of
the top 100 global brands trust SDL to simplify the complexity of
managing content across multiple brands, websites, languages and
devices. Go global faster with SDL. Learn more at SDL.com and
follow us on Twitter, LinkedIn and Facebook.
EXECUTIVE CHAIRMAN'S REVIEW
2015 performance
2015 has been an important year in the evolution of our company.
Our Language Services business has further consolidated its
position as one of the leading players in the Global Localisation
market. Indeed, our profitability has reached record levels as a
result of our excellent customer satisfaction and our exceptional
quality. Repeat business is at very high levels and our business
model, utilising our unique network of local offices and people, is
enabling us to deliver extremely strong, profitable, growth.
Since the acquisition of Alterian plc in early 2012 we have been
investing in both technology and sales and marketing in order to
access the global market for Customer Experience Management, CXM.
Whilst considerable progress has been made we have been
disappointed in the overall results. This was due to SDL's focus of
investing in and selling consolidated integrated platforms whereas
the market continues to favour the purchase of specialist point
solutions. As a result, our CXM strategy has failed to gain
traction, resulting in a significant decline in new technology
bookings in our CXM business, with a commensurate increase in
losses from these products.
Operational review
Following my appointment as Executive Chairman in October 2015
the Board has conducted a thorough operational review of the
Group's activities. We have concluded that the business should
refocus around a language centric strategy, helping brands to
manage, translate and deliver localised content on a global
scale.
The Board also concluded that we have a number of significant
areas of strength and opportunity which will form the building
blocks of this future strategy:
1. Our in-house translators working in our network office
structure across 38 countries are valued by clients because direct
access to this in-house, in-country organisation enhances quality.
It also enables local management of any freelancer usage, meaning
tighter control and lower cost to SDL.
2. We have many global enterprise Language Services and
Technology customers across diverse end-markets with high levels of
recurring revenues. Our high penetration and repeat business of our
Translation Management System strategically embeds SDL within our
customer workflow processes and our Translation Productivity
platform is used by over 225,000 translators and localisation
project managers worldwide.
3. Our brand is best known for its language related offers with
a reputation for high-quality and both Trados and Tridion are
strong brands within their market segments.
4. Our global content technologies build upon our language DNA
and provide scalable and secure solutions which are unique in their
ability to deal with the complexity associated with managing and
delivering content on a global scale.
5. Our loyal staff who embrace change and are willing to respond
to challenges and seize opportunities.
To deliver substantial growth in our chosen markets it is
important that we concentrate our investments in these areas.
As a result of our decision to refocus the business around a
language centric strategy, we have concluded that some of our
existing businesses may be more successful under different
ownership. Consequently there are a number of good businesses
within SDL that serve growth markets but are non-core to our future
strategy. These businesses, Fredhopper, Social Intelligence, and
Campaign & Analytics, will be sold.
Dividend
The financial results for the year and confidence in the future
have enabled the Board to recommend a full year dividend of 3.1
pence, an increase of 24% on last year.
Our Board
In October 2015, our founder and CEO, Mark Lancaster, stepped
down from the Board. Since founding the business in 1992, Mark and
his team led the Company through an extraordinary period of growth
to a global market leadership position. The Board would like to
thank Mark for his vision and leadership in building the
business.
As a result, I was appointed to the interim role of Executive
Chairman whilst a thorough search takes place for a new CEO.
CEO succession is a critical issue and the Nomination Committee
is currently working with an international Executive search firm to
find the candidate with the right talents, experience and skills
required to lead SDL's future growth.
Outlook
In conclusion, we are excited by the growth potential for SDL.
Global market expansion coupled with the explosion of digital
content and growing consumer expectations provide the opportunity
for SDL to become a more strategic vendor to our customers. We must
ensure that SDL fully maximises this opportunity to become a
trusted advisor for brands and businesses looking to expand their
global reach in today's digital world. In the short term we will
continue to drive efficiency within our business in order to invest
in the platforms we need for future growth.
As a result, the Board remain confident of another year of
profit growth.
David Clayton
Executive Chairman
OPERATING AND FINANCIAL REVIEW
Summary Performance
2015 has been a been a year of differing progress with excellent
margin performance in our Language Services business, but
disappointing new bookings performance in our Technology
businesses.
Revenues for 2015 were GBP266.9 million (2014: GBP260.4
million). Profit before taxation, amortisation of intangible assets
and one-off costs ("PBTA") was GBP20.6 million (2014: GBP16.5
million). The loss after tax amounted to GBP30.7 million, after an
impairment charge of GBP33.3 million and other one-off costs of
GBP5.8 million (2014: profit after tax, GBP6.6 million).
Gross cash in the business at the year-end was GBP17.2 million
(2014: GBP22.1 million) and net cash after borrowings was GBP12.4
million (2014: GBP13.1 million).
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Revenue in the year increased by 2%. Geographically, Asia grew
by 20%, North America by 8% and Europe was down by 3%.
Language Services continues to deliver revenue growth and
increased margins with significant progress in gross and operating
margins. This segment delivered gross margins of 47.3% (2014:
45.5%) and PBTA margin of 19.9% (2014: 16.4%).
Total bookings from our technology segments had a disappointing
year, down 5% at constant currency.
Cash generated from operations was GBP12.0 million (2014:
GBP22.2 million). Cash generation in the year has been impacted by
cash outflows associated with the restructuring programme and 2014
staff incentive payments. Capital expenditure was GBP2.7 million
(2014: GBP2.4 million). Tax paid was GBP5.8 million (2014: GBP3.9
million).
The business continues to benefit from a diverse mix of regions,
industry verticals and customers, limiting the Group's exposure to
adverse economic conditions in certain countries and sectors.
Customer concentration is in line with prior year with the 20
largest customers contributing 22% (2014: 26%) of revenue in 2015.
No single customer contributes more than 4% of Group revenues. Our
largest customer was Microsoft, but we lost the majority of this
account towards the end of 2015 due to unattractive pricing.
Performance by Segment
Following the operational review, the Group has four operating
segments; Language Services, Language Technology, Global Content
Technologies and the Non-Core businesses. During the year the Group
has revised its internal revenue and cost recharge and allocation
methodologies to better reflect how services and costs are consumed
by each segment. The impact of this change has been to recognise
additional internal revenue recharges of GBP3.8 million and to
reallocate costs of GBP1.3 million between Language Services and
Language Technology segments in 2015. In accordance with IFRS8, the
operating segments and internal recharges for the comparative
period have been restated to provide consistent and meaningful
information.
Language Services (contributing GBP152.8 million or 57% of total
revenue and GBP30.4 million of PBTA) (2014: GBP146.8 million or 56%
of total revenue and GBP24.1 million of PBTA).
2015 saw a solid performance within Language Services achieving
a 4% increase in revenue. PBTA margin increased 3.5% to 19.9%
(2014: 16.4%).
Customers remain at the heart of everything we do. The division
achieved a 94% customer satisfaction rate in 2015, matching that
achieved in 2014. Repeat revenues (revenue earned from existing
customers) increased by 3.5% at constant currency.
In 2015, we continued our ongoing investment in people, as we
continue to build a highly skilled and experienced workforce with
particular emphasis on project management training and vertical
market expertise. This supported a new vertical market strategy
introduced during 2015, which saw the soft launch of 8 vertical
language technology platforms with particular focus on the Life
Sciences and Travel industries. This investment, which will
continue in 2016, has resulted in a number of strategic new account
wins in 2015 which will build revenue in 2016 and beyond.
Operational efficiency remains a core focus in driving margin
performance and we increased our utilisation of low cost centres of
excellence for back office and support functions. We also continued
our "Technology Enabled Services" program to continue to automate
and optimise processes with the rollout of SDL Groupshare. These
initiatives helped drive an increase in gross margin rate.
Good progress in our regional operations has also been
achieved:
-- New leadership and a restructuring of sales in North America
led to 152% new business growth and over 90 new customer wins which
drove revenue up by 18%.
-- APAC continued to experience strong growth with an overall
revenue increase of 9%. This was driven by a 7% increase in the
growth of existing business and a 19% increase in new revenue
generation.
-- The EMEA market experienced some price pressure from legacy
customers and high inflation in Southern and Eastern European
countries resulting in a revenue contraction of 3%. Despite these
economic challenges, the gross margin was maintained.
New client wins include ADAMA, Akami, Actoz Soft, Huawei,
Incheon Airport, I-ON Communications, Kaeser Kompressoren SE,
Mitsubishi Electric, Office Depot, Polaris Office and TetraPack
Korea.
Language Technology (contributing GBP36.7 million or 14% of
revenue and GBP1.3 million PBTA) (2014: contributing GBP37.4
million or 14% of revenue and GBP5.1 million PBTA).
Our Language Technology total bookings increased 3% at constant
currency. Renewal bookings grew 6% which helped drive annual
recurring revenue up by 5% at constant currency.
Reported revenue fell 2%. PBTA margin fell 10.0% to 3.5% (2014:
13.5%).
Although our Translation Management products group increased
revenue by 8%, we did see a down-turn in our US Government
business. This was partly planned as we refocused our Machine
Translation research group activities on increasing the quality of
output from our Machine Translation products for our core customers
and away from external research projects. Underlying performance
was also below expectations and this business underwent a
restructuring at the end of 2015.
SDL's Translation Productivity tools are used by 70% of the
world's professional translators and we are very pleased that our
product commitment scores for SDL Trados Studio increased by 37% in
2015. Investment in new market entry also began to show dividends
in 2015 with new sales in India and Singapore and sales growth in
South Korea. Overall revenue was up 8% but was impacted by
instability in the Eurozone and geopolitical issues in the Middle
East and Russia.
2015 saw the launch of 5 major product and technology releases:
SDL Language Cloud Managed Translation, XMT, SDL WorldServer 11,
SDL TMS 11 and SDL Trados Studio 2015. Each of these followed a
theme of improved User Experience and Connectivity, feeding into
our strategy of making language technology capabilities more easily
accessible than ever before. We also established a number of
strategic partnerships including embedding our machine translation
capabilities into salesforce.com and establishing connectors to a
number of leading content solutions including WordPress, Drupal and
Adobe Experience Manager as well as strengthening integration with
our own SDL Web and SDL Knowledge Centre content platforms.
New client wins include Brand USA, Kaspersky Lab, Next IT,
Office Depot, PayPal, Inc., Rentalcars.com, Symantec and
YarnTree.
Global Content Technologies (contributing GBP50.9 million or 19%
of revenue and losses of GBP1.5 million PBTA) (2014: contributing
GBP51.4 million or 20% of revenue and losses of GBP1.5 million
PBTA).
Our Global Content Technologies total bookings fell 10% at
constant currency. Renewal bookings grew by 20% following good new
licence bookings performance in 2014. However, 2015 new license
bookings were down 47% which led to restructuring and refocusing of
the sales and marketing teams in July and in early 2016. Annual
recurring revenue was flat at constant currency.
Reported revenue fell 1%. Loss before tax, amortisation and
one-off costs was in line with last year at GBP1.5 million (2014:
GBP1.5 million).
In 2015, we released new versions of SDL Web, SDL Knowledge
Center and SDL Contenta Publishing Suite and we have continued to
improve the integration of our Language Technology into all our GCT
products. Key new product developments included:
- SDL Web developments introduce a site launch wizard,
simplified integration into e-commerce systems, new cloud
capabilities and the product achieved ISO 27001 certification.
- SDL Knowledge Center now integrates 3(rd) party taxonomy
solutions, makes content from disparate sources more accessible
from one self-service experience and increases the relevance of
technical communications.
- SDL Contenta Publishing Suite developments now allow users to
master the creation, management and delivery of content for
companies using the S1000D aerospace and defense specification.
New client wins include Alfa Laval AB, Canon, China Airlines,
Cymer Inc, DAF Trucks NV, Folfsam AB, and Philips Medical Systems
Nederland BV
Non-Core businesses (contributing GBP26.5 million or 10% of
revenue and losses of GBP9.6 million PBTA) (2014: contributing
GBP24.8 million or 10% of revenue and losses of GBP11.2 million
PBTA).
Our Non-Core businesses include our Fredhopper, Campaign &
Analytics and Social Intelligence businesses. These businesses
operate in fast growing markets (20-35% annual growth) but these
businesses are not closely related to our future language centric
strategy. As such, the Board has announced our intention to sell
these businesses to owners better able to invest in and support
their future growth.
In 2015, total bookings fell 6% at constant currency. Renewal
bookings increased by 1% and 2015 new bookings were down 23%.
Annual recurring revenue was up 1% at constant currency.
Reported revenue grew 7%, principally driven by our Fredhopper
business which grew 15% in 2015. Loss before tax, amortisation and
one-off costs remained high at GBP9.6 million (2014: GBP11.2
million).
New client wins include Bakker Hillegom BV, Eight Dragons
Digital, Hillarys Blinds, Kikki.K Pty Ltd, Kurt Geiger, Missguided,
Snow leader and The Association of Mature American Citizens.
Gross Margin
The Group's gross margin was in line with last year at 56.2%
(2014: 56.6%).
Administrative Expenses
Administrative costs excluding intangibles amortisation and
one-off costs decreased in 2015 to GBP129.3 million (2014: GBP130.7
million).
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Research and development costs of GBP26.9 million (2014: GBP27.6
million) are included in administrative expenses. During the year,
the Group issued 13 product releases with greater functionality
being deployed. In addition, we have adopted a continuous release
programme for our SaaS products which improves our customers'
experience by delivering releases quicker and more effectively than
in prior years.
Development costs have been reviewed and the Board remains of
the opinion that capitalisation criteria under International
Accounting Standard (IAS) 38 are not met. Consequently no
development costs are capitalised on the balance sheet.
Average headcount during the year increased to 3,504 (2014:
3,245). The Group has continued to recruit employees in low cost
locations to optimise operational efficiencies. Employee related
costs remain the most significant component of Group costs,
amounting to 69% of Group overheads (2014: 66%) excluding
amortisation of intangibles and one-off costs.
Intangible assets ascribed to certain of the Group's software
and customer relationships arising from acquisitions are amortised
over periods of between 5 and 10 years and the carrying value is
formally reviewed on an annual basis to assess whether there are
indicators of impairment. The intangible asset amortisation charge
in 2015 was GBP6.7 million (2014: GBP7.1 million).
One-off costs
Intangible assets and goodwill were allocated to six Cash
Generating Units ("CGU") namely Language Services, Language
Technology, Global Content Technologies and the three Non-Core
businesses. Following the poor new licence bookings performance of
the Group's technology CGUs and the Group's operational review, the
2015 impairment review resulted in an impairment of GBP33.3 million
across the Language Technology and Non-Core CGUs (2014: nil).
In addition to this impairment, the Group has incurred GBP5.8
million of other one-off costs in the year. These costs relate to:
redundancy and retention costs associated with the reorganisation
of the Group in 2015; professional fees and related charges
associated with the operational review; corporate consolidation
exercises carried out in the year; and provision for one-off tax
liabilities.
Earnings Per Share
Basic earnings per share when adjusted for one-off costs and
amortisation of intangibles ("adjusted EPS") increased by 7% to
16.13 pence (2014: 15.10 pence). Basic earnings per share was a
loss of 37.93 pence (2014: profit of 8.03 pence).
Financing Costs
Interest costs in 2015 were GBP0.1 million (2014: GBP0.4
million). At the start of the year, drawn borrowings were GBP9.0
million. During 2015, we repaid these borrowings to Royal Bank of
Scotland and drew down GBP4.8 million under the Group's new 5 year
banking facility with HSBC plc.
Cash flow
The Group generated GBP12.0 million from operations during the
year (2014: GBP22.2 million). This cash inflow was net of GBP3.8
million of exceptional cash outflows arising from our restructuring
activities and 2014 staff incentive payments.
Surplus cash, after deducting net income tax paid of GBP5.8
million (2014: GBP3.9 million) and investing activities of GBP2.9
million (2014: GBP2.6 million), has been used to reduce the Group's
bank borrowings by GBP4.2 million and pay a dividend of GBP2.0
million to shareholders. The Group's bank borrowings of GBP4.8
million have been fully repaid in 2016.
As a result net cash reduced slightly to GBP12.4 million at year
end (2014: GBP13.2 million).
Borrowing Facilities
During the year, the Group signed a new GBP25 million committed
revolving credit facility with HSBC plc, expiring in August 2020.
The agreement also includes a GBP25m uncommitted Accordian
facility.
Pricing of this GBP25 million borrowing facility is between
1.15% and 1.9% above LIBOR dependent upon the ratio of the Group's
total net debt to its adjusted earnings before interest, tax,
depreciation and amortisation. Under the credit facility agreement,
SDL is subject to certain financial covenants which are required to
be tested quarterly. These covenants relate to Adjusted EBITDA: Net
Finance Charges and Total Net Debt: Adjusted EBITDA.
Derivatives and other Financial Instruments
The Group has cash and short-term deposits of varying durations
to fund its working capital needs and other financial assets and
liabilities such as trade receivables and trade payables arising
directly from its operations. The Group's policy is that no active
trading in financial instruments will be undertaken within the
operating units and all decisions on use of financial instruments
will be taken at Group level under the direction of the Chief
Financial Officer.
Taxation
SDL is a global business and, as such, the Group's effective tax
rate is heavily influenced by the territorial mix of operating
profits earned together with management judgement of the extent to
which the Group's tax losses are likely to be utilised with
reasonable certainty. A detailed analysis of the taxation charge is
included in note 4 to the preliminary financial information.
The tax charge for the year is GBP5.5 million (2014: GBP2.8
million). This charge includes tax credits associated with
amortisation, deferred tax and tax on one-off costs. The underlying
current effective tax rate during the year was 36.2% (2014: 35.8%)
as a result of unrelieved tax losses arising in a number of
jurisdictions.
Trados Litigation update
The Group has settled the litigation related to the Trados
acquisition. A payment of $1.85 million was made in February 2016
in full and final settlement of all claims.
Dividend
A final dividend for the year ended 31 December 2015 of 3.1
pence per share will be proposed at the Annual General Meeting, an
increase of 24% on the prior year.
Dominic Lavelle
Chief Financial Officer
SDL plc
Consolidated INCOME STATEMENT
For the year ended 31 December 2015
Notes 2015 2014
GBPm GBPm
Sale of goods 50.5 50.6
Rendering of services 216.4 209.8
REVENUE 2 266.9 260.4
Cost of sales (116.9) (112.9)
GROSS PROFIT 150.0 147.5
Administrative expenses 3 (175.1) (137.8)
-------- --------
OPERATING (LOSS)/PROFIT (25.1) 9.7
Operating profit before TAX,
AMORTISATION AND ONE-OFF ITEMS 20.7 16.8
Amortisation of intangible
assets 3 (6.7) (7.1)
One-off items 3 (39.1) -
OPERATING (LOSS)/PROFIT (25.1) 9.7
--------------------------------- ------ -------- --------
Finance income - 0.1
Finance cost (0.1) (0.4)
(LOSS)/PROFIT BEFORE TAX (25.2) 9.4
profit before TAX, AMORTISATION
AND one-off ITEMS 20.6 16.5
Amortisation of intangible
assets 3 (6.7) (7.1)
One-off items 3 (39.1) -
(LOSS)/PROFIT BEFORE TAX (25.2) 9.4
--------------------------------- ------ -------- --------
Tax expense 4 (5.5) (2.8)
(LOSS)/PROFIT FOR THE YEAR
ATTRIBUTABLE TO EQUITY HOLDERS
OF THE PARENT (30.7) 6.6
======== ========
Earnings per ordinary share
- basic (pence) 6 (37.93) 8.03
Earnings per ordinary share
- diluted (pence) 6 (37.93) 7.97
======== ========
Adjusted earnings per ordinary share (basic and diluted) are
shown in note 6.
SDL plc
Consolidated STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2015
Notes 2015 2014
GBPm GBPm
(Loss)/profit for the period (30.7) 6.6
------- ------
Currency translation differences
on foreign operations (6.3) (5.3)
Currency translation differences
on foreign currency quasi equity
loans to foreign subsidiaries 2.5 4.1
Income tax charge on currency
translation differences on
foreign currency quasi equity
loans to foreign subsidiaries 4 (0.7) (1.1)
OTHER COMPREHENSIVE INCOME (4.5) (2.3)
------- ------
TOTAL COMPREHENSIVE INCOME (35.2) 4.3
======= ======
All the total comprehensive income is attributable to equity
holders of the parent Company. Currency translation differences on
foreign operation including quasi equity loans and their related
tax impacts may all be reclassified to the Income Statement upon
disposal of that operation.
SDL plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
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for the year ended 31 December 2015
Notes 2015 2014
GBPm GBPm
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 6.3 7.4
Intangible assets 7 163.1 202.6
Deferred tax asset 6.0 5.3
Rent deposits 1.6 1.7
-------- --------
177.0 217.0
CURRENT ASSETS
Trade and other receivables 73.4 69.4
Corporation tax 2.8 2.3
Cash and cash equivalents 8 17.2 22.1
-------- --------
93.4 93.8
TOTAL ASSETS 270.4 310.8
-------- --------
CURRENT LIABILITIES
Trade and other payables (81.7) (84.0)
Loans and overdraft - (9.0)
Current tax liabilities (9.4) (6.7)
Provisions (2.9) (2.8)
-------- --------
(94.0) (102.5)
NON CURRENT LIABILITIES
Other payables (1.4) (1.3)
Loans and overdraft (4.6) -
Deferred tax liability (3.1) (4.4)
Provisions (0.4) (0.5)
-------- --------
(9.5) (6.2)
TOTAL LIABILITIES (103.5) (108.7)
-------- --------
NET ASSETS 166.9 202.1
======== ========
EQUITY
Share capital 0.8 0.8
Share premium account 98.5 97.9
Retained earnings 59.6 90.9
Foreign exchange differences 8.0 12.5
-------- --------
TOTAL EQUITY 166.9 202.1
======== ========
Approved by the Board of directors on 15 March 2016
D Clayton D Lavelle
Director Director
SDL plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2015
Share Foreign
Share Premium Retained Exchange
Capital Account Earnings Differences Total
GBPm GBPm GBPm GBPm GBPm
At 1 January 2014 0.8 97.4 83.5 14.8 196.5
Loss for the period - - 6.6 - 6.6
Other comprehensive
income - - - (2.3) (2.3)
--------- --------- ---------- ------------- -------
Total comprehensive
income - - 6.6 (2.3) 4.3
Arising on share
issues* - 0.5 - - 0.5
Share based payments* - - 0.8 - 0.8
--------- --------- ---------- ------------- -------
At 31 December
2014 0.8 97.9 90.9 12.5 202.1
========= ========= ========== ============= =======
Share Foreign
Share Premium Retained Exchange
Capital Account Earnings Differences Total
GBPm GBPm GBPm GBPm GBPm
At 1 January 2015 0.8 97.9 90.9 12.5 202.1
Loss for the period - - (30.7) - (30.7)
Other comprehensive
income - - - (4.5) (4.5)
--------- --------- ---------- ------------- -------
Total comprehensive
income - - (30.7) (4.5) (35.2)
Deferred income
taxation on share
based payments* - - 0.1 - 0.1
Arising on share
issues* - 0.6 - - 0.6
Dividend paid* - - (2.0) - (2.0)
Share based payments* - - 1.3 - 1.3
--------- --------- ---------- ------------- -------
At 31 December
2015 0.8 98.5 59.6 8.0 166.9
========= ========= ========== ============= =======
* These amounts relate to transactions with owners of the
Company recognised directly in equity.
The amounts above are all attributable to equity holders of the
parent company.
SDL plc
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2015
Notes 2015 2014
GBPm GBPm
(LOSS)/PROFIT BEFORE TAX (25.2) 9.4
Depreciation of property, plant
and equipment 3.6 4.7
Amortisation of intangible
assets 6.7 7.1
Impairment losses on intangible
assets 33.3 -
Finance income - (0.1)
Finance costs 0.1 0.4
Share based payments 1.3 0.8
Increase in trade and other
receivables (3.9) (2.0)
(Decrease) / increase in trade
and other payables (1.4) 3.6
Foreign exchange gains (2.5) (1.7)
CASH GENERATED FROM OPERATIONS 12.0 22.2
Income tax paid (5.8) (3.9)
------- -------
NET CASH FLOWS FROM OPERATING
ACTIVITIES 6.2 18.3
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire property,
plant & equipment (2.7) (2.4)
Receipts from sale of property,
plant & equipment 0.1 -
Payments to acquire intellectual
property and subsidiaries (0.3) (0.3)
Interest received - 0.1
------- -------
NET CASH FLOWS FROM INVESTING
ACTIVITIES (2.9) (2.6)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issue of
ordinary share capital 0.2 0.4
Proceeds from borrowings 4.6 -
Repayment of borrowings (9.0) (11.0)
Dividends paid (2.0) -
Repayment of capital leases (0.4) (0.3)
Interest paid (0.1) (0.4)
NET CASH FLOWS FROM FINANCING
ACTIVITIES (6.7) (11.3)
(DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS (3.4) 4.4
======= =======
MOVEMENT IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at
the start of year 22.1 18.2
(Decrease)/increase in cash
and cash equivalents (3.4) 4.4
Effect of exchange rates on
cash and cash equivalents (1.5) (0.5)
------- -------
CASH AND CASH EQUIVALENTS AT
END OF YEAR 8 17.2 22.1
------- -------
SDL plc
notes to the financial INFORMATION
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 2015 or 2014. Statutory consolidated financial statements
for the Group for the year ended 31 December 2014, prepared in
accordance with adopted IFRS, have been delivered to the Registrar
of Companies and those for 2015 will be delivered in due course.
The auditors have reported on those 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 financial information for the year ended 31 December 2015
has been prepared by the directors based upon the results and
position that are reflected in the consolidated financial
statements of the Group.
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
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The accounting policies adopted in the preparation of the
condensed consolidated financial information are consistent with
those followed in preparation of the Group's annual financial
statements for the year ended 31 December 2014.
In line with UK Corporate Governance Code requirements, the
Directors have made enquiries concerning the potential of the
business to continue as a going concern.
The Directors' enquiries included a review of performance in
2015, 2016 annual plans, a review of working capital including the
liquidity position, financial covenant compliance and a review of
current cash levels. As a result, 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 accounts.
2. SEGMENT INFORMATION
The Group operates in the global content management and language
translation industries. For management purposes, the Group is
organised into business units based on the nature of their products
and services. Following the completion of the Group's operational
review, the Group has four operating segments as follows:
-- The Language Services segment is the provision of a
translation service for customer's multilingual content in multiple
languages.
-- The Language Technology segment is the sale of enterprise,
desktop and statistical machine translation technologies together
with associated consultancy services.
-- The Global Content Technologies segment is content management
and knowledge management technologies together with associated
consultancy services.
-- The Non-Core Businesses segment includes the sale of campaign
management, social media monitoring and marketing analytic and
Fredhopper technologies together with associated consultancy
services.
The Chief Operating Decision Maker monitors the results of the
operating segments separately for the purpose of making decisions
about resource allocation and performance assessment prior to
charges for tax, amortisation and one-offs.
Following the completion of the Group's 2015 operational review,
the Group has also revisited its internal recharge allocation
methodologies during the year to better reflect how services and
costs are consumed by each segment. The impact of this restatement
has been to recognise additional internal revenue recharges of
GBP3.8 million and to reallocate costs of GBP1.3 million between
Language Services and Language Technology segments. In accordance
with IFRS8, the operating segments and internal recharges for the
comparative period have been restated to provide consistent and
meaningful information.
Year ended 31 December 2015
Segment
profit/
(loss)
before
taxation
External Internal Total Shared and
Revenue Revenue Revenue costs Depreciation amortisation
GBPm GBPm GBPm GBPm GBPm GBPm
Language Services 152.8 - 152.8 24.0 1.3 30.4
Language Technology 36.7 5.5 42.2 7.5 1.3 1.3
Global Content
Technologies 50.9 - 50.9 11.5 0.4 (1.5)
Non-Core Businesses 26.5 - 26.5 8.5 0.6 (9.6)
--------- --------- --------- ------- ------------- --------------
Total 266.9 5.5 272.4 51.5 3.6 20.6
--------- --------- --------- ------- -------------
Amortisation
& One-off costs (45.8)
--------------
Profit before
taxation (25.2)
==============
Year ended 31 December 2014: restated
Segment
profit/
(loss)
before
taxation
External Internal Total Shared and
Revenue Revenue Revenue costs Depreciation amortisation
GBPm GBPm GBPm GBPm GBPm GBPm
Language Services 146.8 - 146.8 22.6 1.6 24.1
Language Technology 37.4 5.5 42.9 7.0 1.6 5.1
Global Content
Technologies 51.4 - 51.4 10.3 0.6 (1.5)
Non-Core Businesses 24.8 - 24.8 7.2 0.9 (11.2)
--------- --------- --------- ------- ------------- --------------
Total 260.4 5.5 265.9 47.1 4.7 16.5
--------- --------- --------- ------- -------------
Amortisation (7.1)
--------------
Profit before
taxation 9.4
==============
Shared costs represent total central costs which are allocated
to segments in each year.
Geographical analysis of external revenues by country of
domicile is as follows:
2015 2014
GBPm GBPm
UK 69.8 70.0
USA 77.4 72.1
Republic of Ireland 22.2 22.1
Netherlands 20.1 20.9
Belgium 14.8 17.2
Germany 13.1 15.2
Canada 12.7 10.9
Rest of World 36.8 32.0
------ ------
266.9 260.4
====== ======
Geographical analysis of non-current assets excluding deferred
tax is as follows:
2015 2014
GBPm GBPm
UK 67.2 84.6
USA 55.8 75.3
Rest of World 48.0 51.8
------ ------
171.0 211.7
====== ======
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.
3 OTHER REVENUE AND EXPENSES
Group operating profit is stated after charging/(crediting):
2015 2014
GBPm GBPm
Included in administrative expenses:
Research and development expenditure 26.9 27.6
Bad debt charge 0.2 0.3
Depreciation of property, plant
and equipment - owned assets 3.5 4.5
Depreciation of property, plant
and equipment - leased assets 0.1 0.2
Amortisation of intangible assets 6.7 7.1
Operating lease rentals for plant
and machinery 0.5 0.5
Operating lease rentals for land
and buildings 6.5 6.8
Net foreign exchange gains (3.8) (2.2)
Share based payment charge 1.5 1.4
====== ======
The net foreign exchange gains above arose due to movements in
foreign currencies between the time of the original transaction and
the realisation of the cash collection or spend, and the
retranslation of foreign currency denominated intra-group
balances.
One-off costs
2015 2014
GBPm GBPm
Impairment charge 33.3 -
Redundancy and retention costs 3.5 0.5
Other one-off costs 2.3 (0.5)
39.1 -
======= ======
One-off costs relate to a number of non-recurring items that
arose during the year.
Following a disappointing trading year in 2015 for the Group's
technology operating segments and the completion of the 2015
operational review, the group has determined that the carrying
value of goodwill in its Language Technology and Non-Core
Businesses operating segments were impaired by GBP33.3 million.
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The Group began to right size technology sales, marketing and
operations teams in the second half of 2015. These actions,
together with the departure of the Group CEO, lead to non-recurring
redundancy costs of GBP3.0m being incurred in the year. The Group
also sought to retain key employees during this time of change
within the organisation and hence retention packages have been
provided to these individuals. The 2015 charge represents the time
based cost of these incentive packages in 2015 and further costs
will be incurred in 2016 as the service periods elapse. The total
charge for non-recurring retention and staff related costs in the
year was GBP0.5 million.
Other one-off costs relate to professional and related fees
associated with the Group's operational review and corporate
consolidations carried out in 2015 and non-recurring indirect tax
liabilities. The Group has grown through acquisition over the past
10 years and inherited a complex and costly group structure. Major
corporate consolidation projects have occurred in the United
States, the Netherlands, Belgium and France in 2015. Some further
costs will be incurred in 2016 associated with the completion of
this simplification exercise.
These have been separately disclosed in the income statement to
provide a better guide to underlying business performance.
4 INCOME TAX
Income tax on profit:
Consolidated income statement
2015 2014
GBPm GBPm
Current taxation
UK Income tax charge
Current tax on income for the period 1.9 0.9
Adjustments in respect of prior
periods 0.1 0.1
2.0 1.0
====== ======
Foreign tax
Current tax on income for the period 4.9 5.0
Adjustments in respect of prior
periods 0.5 (0.1)
------ ------
5.4 4.9
------ ------
Total current taxation 7.4 5.9
====== ======
Deferred income taxation
Origination and reversal of temporary
differences (1.9) (3.1)
Total deferred income tax (1.9) (3.1)
====== ======
Tax expense 5.5 2.8
====== ======
Consolidated statement of other comprehensive income
2015 2014
GBPm GBPm
Current taxation
UK Income tax charge
Income tax charge on currency translation
differences on foreign currency
quasi equity loans to foreign subsidiaries 0.7 1.1
------ ------
Total current taxation 0.7 1.1
====== ======
A tax credit in respect of share based compensation for current
taxation of GBPnil (2014: GBPnil) has been recognised in the
statement of changes in equity in the year.
A tax debit in respect of share based compensation for deferred
taxation of GBP0.1 million (2014: GBPnil) has been recognised in
the statement of changes in equity in the year.
5 DIVIDENDS
2015 2014
GBPm GBPm
Amounts recognised as distributions
to equity holders in the year:
Final dividend for the year ended
31 December 2014 was 2.5 pence
per share (Year ended 31 December
2013: Nil) 2.0 -
===== =====
A final dividend for the year ended 31 December 2015 of 3.1
pence per share will be proposed at the Annual General Meeting and
has not been included as a liability in the financial
statements.
6 EARNINGS PER SHARE
The calculation of basic earnings per ordinary share is based on
a loss after tax of GBP30.7 million (2014: profit of GBP6.6
million) and 81,101,706 (2014: 80,758,772) 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. For 2015, the diluted ordinary shares were based on
81,823,905 ordinary shares that included 722,199 potential ordinary
shares.
The following reflects the income and share data used in the
calculation of adjusted earnings per share computations before
one-off costs:
2015 2014
GBPm GBPm
(Loss)/profit for the year (30.7) 6.6
One-off costs (including impairment
loss) 39.1 -
Amortisation of intangible fixed
assets 6.7 7.1
Less: tax benefit associated with
the amortisation of intangible
fixed assets. (1.3) (1.4)
Tax benefit associated with one-off
costs (0.6) -
------- ------
Adjusted profit for the year 13.2 12.3
======= ======
Adjusted earnings per share is shown as the Directors believe
that earnings before amortisation and one-off costs is reflective
of the underlying performance of the business.
2015 2014
No. No.
Weighted average number of ordinary
shares for basic earnings per share 81,101,706 80,758,772
Effect of dilution resulting from
share options 722,199 614,620
----------- -----------
Weighted average number of ordinary
shares adjusted for the effect
of dilution 81,823,905 81,373,392
=========== ===========
2015 2014
Adjusted earnings per ordinary
share - basic (pence) 16.13 15.10
Adjusted earnings per ordinary
share - diluted (pence) 15.99 14.98
=========== ===========
There have been no material transactions involving ordinary
shares or potential ordinary shares between the reporting date and
the date of completion of the financial statements.
7 INTANGIBLE ASSETS
Customer Intellectual
Relationships Property Goodwill Total
GBPm GBPm GBPm GBPm
Cost:
At 1 January 2014 20.1 60.6 213.5 294.2
Currency adjustment 0.1 - 0.6 0.7
--------------- ------------- --------- --------
At 1 January 2015 20.2 60.6 214.1 294.9
Acquisitions - 0.3 - 0.3
Currency adjustment 0.1 (0.2) 0.3 0.2
--------------- ------------- --------- --------
At 31 December 2015 20.3 60.7 214.4 295.4
=============== ============= ========= ========
Amortisation and
impairment:
At 1 January 2014 (12.3) (40.3) (32.6) (85.2)
Provided during the
year (2.3) (4.8) - (7.1)
Currency adjustment 0.1 (0.1) - -
At 1 January 2015 (14.5) (45.2) (32.6) (92.3)
Provided during the
year (1.9) (4.8) - (6.7)
Impairment loss - - (33.3) (33.3)
Currency adjustment 0.1 (0.1) - -
--------------- ------------- --------- --------
At 31 December 2015 (16.3) (50.1) (65.9) (132.3)
=============== ============= ========= ========
Net book value:
At 31 December 2015 4.0 10.6 148.5 163.1
===============
At 1 January 2015 5.7 15.4 181.5 202.6
=============== ============= ========= ========
Customer relationships and intellectual property are amortised
on a straight-line basis over their estimated useful lives of
between 5 and 10 years. As from 1 January 2004, the date of
transition to IFRS, goodwill is no longer amortised but is now
subject to annual impairment testing.
8 ADDITIONAL CASH FLOW INFORMATION
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