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SDL PLC   -  SDL   

Final Results

Released 07:00 15-Mar-2016

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

£m

2014

£m

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 £266.9 million (2014: £260.4 million)

·      Profit before tax, amortisation and one-off costs, PBTA, £20.6m (2014: £16.5million)

·      Impairment charge of £33.3 million; other one-off costs of £5.8 million

·      Loss after tax £30.7 million (2014: profit after tax £6.6 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 £266.9 million (2014: £260.4 million). Profit before taxation, amortisation of intangible assets and one-off costs ("PBTA") was £20.6 million (2014: £16.5 million). The loss after tax amounted to £30.7 million, after an impairment charge of £33.3 million and other one-off costs of £5.8 million (2014: profit after tax, £6.6 million).

 

Gross cash in the business at the year-end was £17.2 million (2014: £22.1 million) and net cash after borrowings was £12.4 million (2014: £13.1 million).

 

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 £12.0 million (2014: £22.2 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 £2.7 million (2014: £2.4 million). Tax paid was £5.8 million (2014: £3.9 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 £3.8 million and to reallocate costs of £1.3 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 £152.8 million or 57% of total revenue and £30.4 million of PBTA) (2014: £146.8 million or 56% of total revenue and £24.1 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 £36.7 million or 14% of revenue and £1.3 million PBTA) (2014: contributing £37.4 million or 14% of revenue and £5.1 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 £50.9 million or 19% of revenue and losses of £1.5 million PBTA) (2014: contributing £51.4 million or 20% of revenue and losses of £1.5 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 £1.5 million (2014: £1.5 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 3rd 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 £26.5 million or 10% of revenue and losses of £9.6 million PBTA) (2014: contributing £24.8 million or 10% of revenue and losses of £11.2 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 £9.6 million (2014: £11.2 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 £129.3 million (2014: £130.7 million).

 

Research and development costs of £26.9 million (2014: £27.6 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 £6.7 million (2014: £7.1 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 £33.3 million across the Language Technology and Non-Core CGUs (2014: nil).

 

In addition to this impairment, the Group has incurred £5.8 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 £0.1 million (2014: £0.4 million). At the start of the year, drawn borrowings were £9.0 million. During 2015, we repaid these borrowings to Royal Bank of Scotland and drew down £4.8 million under the Group's new 5 year banking facility with HSBC plc.

 

Cash flow

The Group generated £12.0 million from operations during the year (2014: £22.2 million). This cash inflow was net of £3.8 million of exceptional cash outflows arising from our restructuring activities and 2014 staff incentive payments.

 

Surplus cash, after deducting net income tax paid of £5.8 million (2014: £3.9 million) and investing activities of £2.9 million (2014: £2.6 million), has been used to reduce the Group's bank borrowings by £4.2 million and pay a dividend of £2.0 million to shareholders. The Group's bank borrowings of £4.8 million have been fully repaid in 2016.

 

As a result net cash reduced slightly to £12.4 million at year end (2014: £13.2 million).

 

Borrowing Facilities

During the year, the Group signed a new £25 million committed revolving credit facility with HSBC plc, expiring in August 2020. The agreement also includes a £25m uncommitted Accordian facility.

 

Pricing of this £25 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 £5.5 million (2014: £2.8 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



£m

£m









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



£m

£m









(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

for the year ended 31 December 2015

 


Notes

2015

2014



£m

£m

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

Capital

£m

Share

Premium

Account

£m

Retained

Earnings

£m

Foreign

Exchange

Differences

£m

Total

£m

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

Capital

£m

Share

Premium

Account

£m

Retained

Earnings

£m

Foreign

Exchange

Differences

£m

Total

£m

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

 



£m

 

£m

 

 

(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

Foreign exchange gains


(1.4)

(2.5)

3.6

(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

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 £3.8 million and to reallocate costs of £1.3 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

 


External Revenue

 

 

Internal Revenue

 

 

Total Revenue

 

 

Shared costs

 

 

Depreciation

 

 

 

Segment profit/

(loss) before

taxation and

amortisation


£m

£m

£m

£m

£m

£m

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

 


External Revenue

 

 

Internal Revenue

 

 

Total Revenue

 

 

Shared costs

 

 

Depreciation

 

 

 

Segment profit/

(loss) before

taxation and

amortisation


£m

£m

£m

£m

£m

£m

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

 

 

£m

 

£m

 

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

 

 

£m

 

£m

 

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


£m

£m




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


£m

£m

 

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 £33.3 million. 

 

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 £3.0m 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 £0.5 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

£m

2014

£m

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

£m

2014

£m

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 £nil (2014: £nil) 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 £0.1 million (2014: £nil) has been recognised in the statement of changes in equity in the year.

 

 

5          DIVIDENDS

 


2015

2014


£m

£m

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 £30.7 million (2014: profit of £6.6 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


£m

 

£m

 

(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

Relationships

Intellectual

Property

Goodwill

 

Total

 


£m

£m

£m

£m

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

 

Analysis of Group net debt:

 


1 January

2015

Cash flow

 

Exchange

differences

31 December

2015


£m

£m

£m

£m

Cash and cash equivalents

22.1

(3.4)

(1.5)

17.2

Loans and overdrafts*

(9.0)

4.2

-

(4.8)


13.1

0.8

(1.5)

12.4

* Loans and overdrafts are stated gross, i.e. before the impact of a £0.2m arrangement fee prepayment







1 January

2014

Cash flow

 

Exchange

differences

31 December

2014


£m

£m

£m

£m

Cash and cash equivalents

18.2

4.4

(0.5)

22.1

Loans

(20.0)

11.0

-

(9.0)


(1.8)

15.4

(0.5)

13.1

 

 

9.   EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE

 

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.

 

If approved by shareholders, the dividend will be payable on 3 June 2016 to shareholders on the register on 6 May 2016, with an ex-dividend date of 5 May 2016.

 

There are no other known events occurring after the statement of financial position date that require disclosure.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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