RNS Number:6721C
SDL PLC
07 September 2004
SDL plc
Interim Results for the Six Months ended 30 June 2004
Operating profit before goodwill and intangible asset amortisation increased by
42%
SDL plc ("SDL" or "the Group"), the world's leading provider of translation
services and technology solutions, is pleased to announce its interim results
for the six months ended 30 June 2004.
Highlights:
* Operating profit before goodwill and intangible asset amortisation
increased by 42% to #2.1 million (H1 2003: #1.5 million)
* Turnover at #30.7 million, up 4% at constant exchange rates
* Net funds of #7.7 million (H1 2003: #4.6 million)
* Basic earnings per share before goodwill and intangible asset amortisation
of 2.98 pence (increase of 83%)
* Knowledge-based Translation System launched in April 2004 - major
contracts with Case New Holland and Best Western hotel group
Commenting on these results, Mark Lancaster, Chief Executive, said today:
"For the first half of 2004 profits before goodwill, intangibles amortisation
and tax have increased by 42%, we believe this to be a strong result for the
Group. With a significant proportion of our revenues being generated in the US,
Group turnover has remained flat but is ahead 4% at constant exchange rates.
More importantly however, we have continued to drive the operating performance
of the business forward strongly.
Following the successful launch of SDL's Knowledge-based Translation System
(KbTS), allowing companies to lower significantly the cost of translation, SDL
has used KbTS extensively for delivering translation services to Case New
Holland. More recently KbTS was instrumental in SDL winning a significant
contract with the Best Western hotel group. This latter project would not have
been feasible for Best Western under conventional localization processes.
The changes we predicted in the market are starting to emerge. The larger
customers for translation are continuing to consolidate vendors and are seeking
complete and secure translation solutions that reduce cost. We are starting to
see the benefits of our long term investments in local geographic infrastructure
and software solutions provide a stable profit contribution for the Group. In
the latter months of 2004 we expect to see closure on some of the large
strategic opportunities we have been working on, coupled with a continued
increase in standalone software solutions sales.
We expect 2005 to be a landmark year for SDL as our investments in software
solutions and infrastructure begin to generate significant competitive
advantages over the competition by reducing costs and providing more effective
tailored solutions to the customer."
For further information please contact:
SDL plc On 7 September 2004 tel: 020 7831 3113
Thereafter tel: 01628 410 127
Mark Lancaster, Chairman and Chief Executive
Financial Dynamics Tel: 020 7831 3113
Edward Bridges/Ben Way
About SDL:
SDL International (London Stock Exchange: 'SDL') is the world's leading provider
of translation services and technology solutions. Employing over 1,300 staff
worldwide, its comprehensive and integrated offerings include translation
memory, adaptive machine translation, a full range of localization services and
the world's first knowledge-based translation system.
Whether insourcing or outsourcing, organizations benefit from enhanced
translation productivity through SDL's commitment to continuous innovation in
software and service delivery. Its customers span consumer, SME and enterprise
markets, including global industry leaders Adobe, Bayer, Bosch, Canon, DAF,
Kodak, Microsoft, Morgan Stanley, Reuters and SAP. SDL International is
headquartered in the UK and has 40 offices across North America, Asia and
Europe. For more information, visit www.sdl.com.
Attached:
Chairman's statement
Independent Review Report to SDL plc
Unaudited Consolidated Profit and Loss Account
Unaudited Consolidated Balance Sheet
Unaudited Consolidated Cash Flow Statement
Unaudited Consolidated Cash Flow Reconciliations
Notes to the Unaudited Interim Results
CHAIRMAN'S STATEMENT
Summary
For the first half of 2004 profits before goodwill, intangibles amortisation and
tax have increased by 42% to #2.1 million (H1 2003 - #1.5 million). Revenues
were #30.7 million (H1 2003 - #31.0 million) and the Group's net funds at 30
June 2004 were up 67% to #7.7 million (H1 2003 - #4.6 million).
Although revenue for the first half of 2004 was flat, underlying revenue at
constant exchange rates was up 4%, whilst the actual increase in translation
volume was up by more than 7%, with price erosion of 3% accounting for the
difference. Gross margins have increased to 43% (H1 2003 - 42%) primarily due to
the benefits from our software solutions and the investment in the expansion of
the local territory network offices. The improved gross margin, coupled with
continued overhead cost control, resulted in the net rise in operating profits
before goodwill, intangibles amortisation and tax.
As predicted, in the past 6 months we have seen an increase in demand for larger
localization solutions, with over 50% of these opportunities requiring a
complete service and software solution. We are receiving more approaches from
companies as our presence in the market grows. Our win rate for these larger
opportunities also continues to improve as the customer's needs are increasingly
matched to SDL's solutions. Desktop software sales have increased by over 70%
with the corresponding contribution to the bottom line. Although the relative
contribution of desktop software sales to the Group is small, the penetration of
units in the market place is important as this provides a seamless upgrade path
for enterprise solutions.
Following the successful launch of SDL's Knowledge-based Translation System
(KbTS), allowing companies to lower significantly the cost of translation, SDL
has used KbTS extensively for delivering translation services to Case New
Holland. More recently KbTS was instrumental in SDL winning a significant
contract with the Best Western hotel group. This latter project would not have
been feasible for Best Western under conventional localization processes, and
consequently SDL was the only vendor able to work with them. We have also
successfully introduced our technology into our Agency business, allowing for
reduced cost and process time for these smaller, fast turnaround projects. The
sales process for complete solutions is typically longer than the conventional
localization sale due to the involvement of complex enterprise software
solutions, so landing the contract with Best Western ahead of our expectations
was particularly encouraging.
Outlook
The translation industry will continue to experience price pressure in the next
12 months, and we do not expect to see any upside in the exchange rates, which
will continue to have an impact on SDL's top line growth in the short term.
However the changes we predicted in the market are starting to emerge. The
larger customers for translation are continuing to consolidate vendors and are
seeking complete and secure translation solutions that reduce cost. We are
starting to see the benefits of our long term investments in local geographic
infrastructure and software solutions provide a stable profit contribution for
the Group. In the latter months of 2004 we expect to see closure on some of the
large strategic opportunities we have been working on, coupled with a continued
increase in standalone software solutions sales.
We expect 2005 to be a landmark year for SDL as our investments in software
solutions and infrastructure begin to generate significant competitive
advantages over the competition by reducing costs and providing more effective
tailored solutions to the customer.
Mark Lancaster
6 September 2004
Independent Review Report to SDL plc
INTRODUCTION
We have been instructed by the company to review the financial information for
the six months ended 30 June 2004 which comprises the Consolidated Profit and
Loss Account, Consolidated Balance Sheet, Consolidated Cash Flow Statement,
Consolidated Statement of Total Recognised Gains and Losses and the related
notes 1 to 8. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by the law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.
DIRECTORS' RESPONSIBILITIES
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
REVIEW WORK PERFORMED
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data, and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied, unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
REVIEW CONCLUSION
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2004.
Ernst & Young LLP
Reading
6 September 2004
SDL plc
Unaudited Consolidated Profit and Loss Account
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
notes #'000 #'000 #'000
Turnover 2 30,670 31,003 64,378
Cost of sales (17,635) (18,140) (36,705)
Gross profit 13,035 12,863 27,673
Administrative expenses (10,951) (11,398) (23,412)
OPERATING PROFIT BEFORE AMORTISATION OF
GOODWILL AND INTANGIBLE ASSETS 2,084 1,465 4,261
Amortisation of goodwill and intangible assets (2,429) (2,424) (4,909)
OPERATING LOSS ON ORDINARY ACTIVITIES 3 (345) (959) (648)
Net interest receivable/(payable) and similar charges 34 (45) (156)
LOSS ON ORDINARY
ACTIVITIES BEFORE TAXATION (311) (1,004) (804)
Tax on loss on ordinary activities 4 (491) (537) (984)
LOSS ON ORDINARY
ACTIVITIES AFTER TAXATION (802) (1,541) (1,788)
Pence Pence Pence
Basic and diluted loss per share 5 (1.47) (2.85) (3.30)
Basic earnings per share before goodwill and
intangible asset amortisation 5 2.98 1.63 5.76
Diluted earnings per share before goodwill and
intangible asset amortisation 5 2.83 1.57 5.49
Unaudited Consolidated Statement of Total
Recognised Gains and Losses #'000 #'000 #'000
Loss for the period 7 (802) (1,541) (1,788)
Currency translation differences on foreign
currency net investments 7 (5) 368 278
Total losses recognised in the period (807) (1,173) (1,510)
SDL plc
Unaudited Consolidated Balance Sheet
30 June 30 June 31 December
2004 2003 2003
notes #'000 #'000 #'000
FIXED ASSETS
Intangible assets 22,004 26,876 24,423
Tangible assets 2,671 3,554 2,560
24,675 30,430 26,983
CURRENT ASSETS
Debtors 13,871 13,086 13,057
Cash at bank and in hand 7,831 6,539 7,295
21,702 19,625 20,352
CREDITORS: amounts falling due within one year 6 (11,974) (15,140) (12,316)
NET CURRENT ASSETS 9,728 4,485 8,036
TOTAL ASSETS LESS CURRENT LIABILITIES 34,403 34,915 35,019
CREDITORS: amounts falling due after more than one year (9) (502) (19)
PROVISIONS FOR LIABILITIES AND CHARGES (1,064) (251) (1,154)
33,330 34,162 33,846
CAPITAL AND RESERVES
Called up share capital 7 555 541 542
Share premium account 7 43,953 43,549 43,569
Shares to be issued 7 210 316 316
Profit and loss account 7 (11,388) (10,244) (10,581)
SHAREHOLDERS' FUNDS - Equity interests 7 33,330 34,162 33,846
The Interim Financial Information presented in this Interim Report was approved
by the Board of Directors on 6 September 2004.
SDL plc
Unaudited Consolidated Cash Flow Statement
6 months
6 months to to Year to
30 June 30 June 31 December
2004 2003 2003
#'000 #'000 #'000
NET CASH INFLOW FROM OPERATING ACTIVITIES 1,401 1,599 4,470
RETURN ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 46 74 66
Interest paid (1) (93) (184)
Finance lease interest (11) (26) (38)
34 (45) (156)
TAXATION
Overseas and UK tax paid (584) (183) (479)
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets (528) (1,184) (1,363)
Receipts from sale of tangible fixed assets 20 - 351
(508) (1,184) (1,012)
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings (123) (789) (822)
Net cash acquired with subsidiary undertakings - 623 623
(123) (166) (199)
NET CASH INFLOW BEFORE FINANCING 220 21 2,624
Proceeds from issue of ordinary sharecapital 291 - 21
Repayment of short term and long term loans (18) (73) (1,437)
Capital element of finance lease rentalpayments (22) (139) (557)
251 (212) (1,973)
INCREASE/(DECREASE) IN CASH IN THE PERIOD 471 (191) 651
SDL plc
Unaudited Consolidated Cash Flow Reconciliations
6 months
6 months to to Year to
30 June 30 June 31 December
2004 2003 2003
#'000 #'000 #'000
(a) Reconciliation of operating loss
to net cash inflow from operating activities
Operating loss (345) (959) (648)
Depreciation 518 646 1,415
Amortisation of goodwill and intangible assets 2,429 2,424 4,909
Loss on disposal of tangible fixed assets - 5 57
Increase in debtors (671) (2,326) (1,794)
Increase/(decrease) in creditors and provisions (404) 1,441 231
Exchange differences (126) 368 300
Net cash inflow from operating activities 1,401 1,599 4,470
(b) Reconciliation of net cash flow to
movement in net funds
Increase/(decrease) in cash 471 (191) 651
Cash outflow from decrease in debt and lease financing 40 212 1,994
Change in net funds resulting from cashflows 511 21 2,645
Translation difference - - (22)
Movement in net funds 511 21 2,623
Net funds at start of period 7,223 4,600 4,600
Net funds at end of period 7,734 4,621 7,223
(c) Reconciliation of net funds to balance sheet
Cash at bank 7,831 6,539 7,295
Current borrowing (65) (230) -
Current net cash 7,766 6,309 7,295
Finance leases (32) (450) (54)
Loan notes - (1,238) (18)
Net funds at end of period 7,734 4,621 7,223
SDL plc
Notes to the Unaudited Interim Results
1. Basis of preparation
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's audited financial statements for the
year ended 31 December 2003.
2. Turnover and segmental information
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
#'000 #'000 #'000
Total continuing operations 30,670 31,003 64,378
6 months to 6 months to Year to
30 June 30 June 31 December
Geographic: 2004 2003 2003
#'000 #'000 #'000
United Kingdom 2,480 1,889 5,177
Rest of Europe 11,163 12,042 23,349
USA 11,842 12,862 26,636
Rest of North America 3,029 2,594 5,919
Rest of the World 2,156 1,616 3,297
Total continuing operations 30,670 31,003 64,378
Further analysis of turnover, profit and net assets by geographical segment is
not disclosed because the directors consider such disclosure would be
prejudicial to the business.
3. Operating Loss on Ordinary Activities
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
#'000 #'000 #'000
Is stated after charging:
Research and development expenditure 1,389 1,350 2,642
Depreciation of owned and leased assets 518 646 1,415
Amortisation of goodwill and intangibles 2,429 2,424 4,909
4. Taxation
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
#'000 #'000 #'000
UK Corporation Tax:
UK Current tax on income for the period 164 63 180
Adjustments in respect of prior periods (90) - (85)
74 63 95
Foreign Tax:
Current tax on income for the period 471 381 1,169
Adjustments in respect of prior periods - 93 152
471 474 1,321
Total Current Taxation 545 537 1,416
Deferred Taxation:
Origination and reversal of timing differences 122 - (432)
Adjustments in respect of prior periods (176) - -
Total Deferred Taxation (54) - (432)
Tax on loss on ordinary activities 491 537 984
5. Earnings per share
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
m m m
Basic weighted average number of shares 54.7 54.1 54.1
Employee share options and shares to be issued 2.8 2.0 2.7
Diluted weighted average number of shares 57.5 56.1 56.8
6 months to 6 months to Year to
30 June 30 June 31 December
2004 2003 2003
#'000 #'000 #'000
Loss attributable to shareholders (802) (1,541) (1,788)
Amortisation of goodwill and intangible assets 2,429 2,424 4,909
Earnings before amortisation of goodwill and intangible 1,627 883 3,121
assets
Note that where the effect of share options is anti-dilutive the diluted
earnings per share will be the same as the basic.
6. Creditors: Amounts falling due within one year
30 June 30 June 31 December
2004 2003 2003
#'000 #'000 #'000
Trade creditors 2,551 3,730 2,409
Bank overdrafts 65 230 -
Loan notes - 902 18
Obligations under finance lease contracts 23 295 35
Corporation tax 1,631 1,002 1,578
Deferred tax liability 76 - 78
Other creditors and accruals 7,628 8,981 8,198
11,974 15,140 12,316
7. Equity shareholders' funds
Share Share Shares to be Profit & Total
Capital Premium issued Loss
#'000 #'000 #000 #'000 #'000
At 31 December 2003 542 43,569 316 (10,581) 33,846
Arising on share issues 13 384 (106) - 291
Loss for the period - - - (802) (802)
Currency translation differences on foreign
currency net investments - - - (5) (5)
At 30 June 2004 555 43,953 210 (11,388) 33,330
8. Results for 2003 and interim 2004
The accounts in this statement do not comprise full accounts within the meaning
of section 240 of the Companies Act 1985. The figures for the year ended 31
December 2003 have been extracted from the 2003 Annual Report but do not
comprise statutory accounts for that period. The audited financial statements
have been delivered to the Registrar of Companies. The Auditors made an
unqualified report on those accounts and their report did not contain any
statement under section 237(2) or (3) of the Companies Act 1985.
The accounts in this statement have been prepared in accordance with generally
accepted accounting principles in the UK. The company is aware that the
interim report and annual report and accounts for 2005 (and the 2004
comparatives) will both be required to be reported on under International
Accounting Standards. The company has a program to comply with this
requirement and intends to give an indication of the likely impact on the 2005
reports in the 2004 annual report and accounts.
SDL plc
Corporate Information
Directors
Mark Lancaster (Chairman and Chief Executive)
Alastair Gordon (Chief Financial Officer)
Cristina Lancaster (Chief Operations Officer)
Keith Mills (Chief Technical Officer)
Christopher Batterham*
John Matthews*
* Non-executive directors
Company Secretary
John Adams
Registered Office
Globe House
Clivemont Road
Maidenhead
Berkshire
SL6 7DY
Registered in England No. 2675207
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
This information is provided by RNS
The company news service from the London Stock Exchange
END
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