RNS Number:9733H
SDL PLC
25 February 2003
The issuer advises that the following replaces the preliminary results
announcement for the year ended 31 December 2002 released today at 7.30 am,
25 February 2003, under RNS 9041H.
Tuesday 25 February 2003
SDL PLC
Preliminary Results for the Year ended 31 December 2002
SDL plc ("SDL" or "the Group"), the multilingual products and services company,
is pleased to announce its preliminary results for the twelve months to 31
December 2002.
Highlights:
* Turnover up 72% to #58.0m (2001: #33.7m). Organic growth continues.
* EBITDA profit of #3.0m (2001: loss of #1.4m) including software
development costs of #3.0m (2001: #3.2m), which are written off as incurred
* Pre tax profit (before amortisation of goodwill and intangibles) of #1.2m
(2001: loss of #2.0m)
* Loss per share of 7.10p per share (2001: loss of 11.56p per share)
* Gross margin at 44% (2001: 46%) reflecting the effects of the acquisition
and difficult market conditions during the period
* Acquisition of Alpnet, Inc. ("Alpnet") for #4.7m, plus assumed debt of
#7.2m, consolidating SDL's position as one of the world's largest
globalization and localisation companies.
* Restructuring of Alpnet achieved ahead of schedule and at less cost than
planned
* Cash at year-end was #6.7m (2001: #9.0m)
* Net funds of #4.6m (2001: #9.0m)
* Net debt assumed at Alpnet acquisition reduced from #7.2m to #2.1m
Commenting on the preliminary results Mark Lancaster, Chairman and Chief
Executive of SDL, said:
"2002 has proved to be a challenging year for all SDL's markets, but in spite of
these difficulties the Group has demonstrated yet another year of progress
through organic and acquisition lead growth. Following the acquisition of Alpnet
in January last year, SDL is now a world-wide leader in fully integrated
multilingual-enabling technology."
For further information please contact:
Alastair Gordon Tel: 01628 410100
Chief Financial Officer
Nikki Pollard Tel: 01628 410127
PA to Chairman and Chief Executive
Background information
About SDL:
SDL (http://www.sdlintl.com) is a leading provider of globalization solutions
comprising products such as SDLWebFlowtm, SDLXtm and TranscendRTtm combined with
localisation, engineering and project management services. SDL has offices
throughout USA, Asia and Europe, providing B2B global solutions with
state-of-the-art technology and a full-range of in-house translation services.
Clients include multinational companies such as Oracle, Dun & Bradstreet,
Hewlett Packard, eBay, Microsoft, Sony, Sun Microsystems, Adobe, Robert Bosch
and 3Com.
Attached: Chairman's Statement
Consolidated Profit and Loss Account
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Notes to the Financial Statements
STATEMENT OF CHAIRMAN AND CHIEF EXECUTIVE
OVERVIEW
2002 has proved to be a challenging year for all markets, but, in spite of these
difficulties, the Group achieved revenue growth in the financial year. More
importantly, the Group returned to a profit pre goodwill of #1.2 million (2001 -
loss of #2.0 million). EBITDA improved to enable the Group to end the year with
net cash after the costs of restructuring and integrating the Alpnet Group and
after maintaining its strategic investment in technology.
The Alpnet acquisition early in 2002 has now been integrated into the Group
making SDL one of the largest localisation companies in the world. The Group is
now arguably the worldwide leader in fully integrated multilingual-enabling
technology, SDL being the only leading service provider to own the technology
that gives an end to end technology and service solution. To help maintain this
position, SDL incurred development costs of #3.0 million during the year (2001 -
#3.2 million), though, with the increased size of the Group, this now represents
only 5.2% of revenue (2001 - 9.4%).
SDL's solutions and technology led strategy is unchanged and we will continue to
further consolidate the Group's position of being the pre-eminent provider of
globalization solutions to international businesses. While trading conditions
have remained difficult, the financial resources of the Group and profitability
of the services and solutions business have enabled us to continue this
strategy. We are seeing increased adoption of multilingual system solutions. The
doubling of the Group's size provides significant market profile and financial
stability. During the year the Group retained growing repeat business with
customers like Hewlett Packard, Adobe, Kodak and Oracle while obtaining major
new clients such as Bayer, CIBC, Robert Bosch and DAF trucks.
The consolidation in the market place has continued both in terms of the
customers and vendors in the industry. We believe we are one of only three in
the leading group of localisation providers. From the customer perspective the
larger clients are seeking a limited number of financially strong vendors, who
are able to provide them with a quality and timely global service. They are also
beginning to demand that this service enables them to see enhanced real returns
on their investments in the globalization of their own products and services.
This growing sophistication in the market's needs matches closely SDL's strategy
of increasing the technology driven solutions that SDL now provides.
The technological advances also help position SDL in the commodity end of the
translation market. SDL has transformed its FreeTranslation.com and
Click2Translate.com sites using the benefits of the real time translation
technology acquired in 2001. FreeTranslation.com is now attracting 1.5 million
visitors a week, leading to an increased number of users of Click2Translate.com.
The significantly increased activity on the two translation sites has led to a
50% increase in SDL Agency revenue levels and provides leads into other
mainstream business areas. SDL Agency's workflow processes produce high margin
results out of a growing base of smaller, fast turnaround projects.
FINANCIAL PERFORMANCE
The Group's turnover increased from #33.7 million to #58.0 million, an increase
of 72%. Acquisitions contributed #23.3 million, with organic growth from the
existing businesses contributing #1.0 million. Our organic growth in a
temporarily static market resulted from a wider industry recognition of SDL in
the globalization market place, created by the establishment of the Group's
complete product and service solution and enhanced size.
SDL's gross margin percentage fell from 46% to 44%, reflecting the initial
effects of the Alpnet acquisition, the difficult trading conditions and pricing
pressure within the market. The Group restricted the effect of the decline in
gross margin by improvements in production efficiencies. In addition overheads
have been reduced both as percentage of revenue - 42% (2001 - 54%) - and in
absolute terms before the effects of the acquisition. In particular headcount
has been closely monitored and marketing and advertising continues to be
strictly controlled. Earnings before interest, tax, depreciation and
amortisation (EBITDA) was #3.0 million (2001 - loss of #1.4 million). The loss
before tax was #3.5 million (2001 - loss of #5.1 million).
The Group assumed #7.2 million of debt on the acquisition of the Alpnet Group
together with restructuring requirements of over #2 million. The Group has now
reduced the balance of the assumed debt to #2.1million. At the year-end the
Group had gross cash balances of #6.7 million (2001 - #9.0 million) and net
funds stood at #4.6 million (2001 - #9.0 million). This shows a significant
improvement over the position at the half-year when net funds were #1.9 million.
ACQUISITION
The acquisition of Alpnet for #4.7 million plus the assumption of #7.2 million
of debt was successfully completed on 1 February 2002. This was financed from
#6.1 million of equity with the balance coming from the Group's own financial
resources. The integration of the Alpnet Group is now effectively completed,
with all the major restructuring and repositioning of the enlarged Group
achieved in a shorter time frame and at less cost or call on the Group's
financial resources. This has been achieved by the adoption of consistent
processes across the enlarged Group, utilisation of a central price sensitive
freelancer database and the focus on a single sales force in the USA and in
Europe. The success of this integration is reflected in the improvement in
Alpnet's margins from 26% to 33%. However we anticipate that it will take a
further two years to bring the full benefits of the acquisition to bear on the
gross margin.
STRATEGY AND PROSPECTS
The Board considers that 2003 will see flat to possibly declining revenues in
the purely service sector of the globalization market. However, solution based
sales, using the technology that SDL has developed, will increase as translation
workflows and leveraged knowledge-based translation become more necessary. These
solution-based sales are driven by content and time to market opportunities as
well as pricing pressure increases. Translation through the web will develop but
will require cost effective and high quality solutions. These technology-based
solutions are crucial both for large scale sophisticated projects and small
scale translation projects. Translation will rely on workflow and automated
translation. The SDL Group will continue to invest similar levels in the
development of its technology - workflow, real time automated translation and
translation memory - as it has in the past three years. The existence of the
Group's production units in most of the key countries will also enable it to
maintain a competitive position on a global scale in light of the evolving
customer needs.
Mark Lancaster
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2002
Unaudited
Notes 2002 2001
#'000 #'000
TURNOVER
Continuing operations 34,715 33,659
Acquisitions 23,287 -
----- -----
GROUP TURNOVER (2) 58,002 33,659
Cost of sales (32,375) (18,048)
----- -----
GROSS PROFIT 25,627 15,611
Administrative expenses (28,966) (21,150)
----- -----
TOTAL operating LOSS (3) (3,339) (5,539)
Operating profit excluding Research and 4,380 724
development expenditure and amortisation
of goodwill and intangible fixed assets
Research and development expenditure (3,018) (3,173)
Amortisation of goodwill and intangible fixed assets (4,701) (3,090)
Other interest receivable and similar income 134 461
Interest payable and similar charges (313) (20)
----- -----
LOSS ON ORDINARY ACTIVITIES BEFORE
taxation (3,518) (5,098)
Tax on loss on ordinary activities (4) (293) 262
----- -----
LOSS on ordinary ACTIVITIES after
taxation (3,811) (4,836)
Dividends - -
----- -----
retained LOSS for the
financial year (3,811) (4,836)
------ -----
Loss per share - basic and diluted (pence) (5) (7.10) (11.56)
------ -----
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Note Unaudited
2002 2001
#'000 #'000
Loss for the financial year attributable to members
of the parent company (6) (3,811) (4,836)
Exchange difference on retranslation of net assets of
subsidiary undertakings (6) (144) (190)
---- ----
Total recognised losses relating to the year (3,955) (5,026)
---- ----
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2002
Unaudited
Notes 2002 2001
#'000 #'000
FIXED ASSETS
Intangible assets 28,873 19,817
Tangible assets 2,986 1,952
----- -----
31,859 21,769
________ ________
CURRENT ASSETS
Debtors 10,539 7,735
Cash at bank and in hand 6,721 9,006
----- -----
17,260 16,741
CREDITORS: amounts falling due within one year (12,804) (6,661)
----- -----
NET CURRENT ASSETS 4,456 10,080
----- -----
TOTAL ASSETS LESS CURRENT LIABILITIES 36,315 31,849
CREDITORS: amounts falling due after one year (1,029) -
PROVISIONS FOR LIABILITIES AND CHARGES (267) (25)
----- -----
35,019 31,824
----- -----
CAPITAL AND RESERVES
Called up share capital (6) 541 423
Share premium account (6) 43,549 36,517
Profit and loss account (6) (9,071) (5,116)
----- -----
SHAREHOLDERS' FUNDS - ALL EQUITY INTERESTS 35,019 31,824
----- -----
CONSOLIDATED CASHFLOW FOR THE YEAR ENDED
31 DECEMBER 2002
Unaudited
Notes 2002 2001
#'000 #'000
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES (7) 2,223 (336)
________ ________
RETURN ON INVESTMENTS AND SERVICING
OF FINANCE
Interest received 134 461
Interest paid (264) (19)
Finance lease interest (49) (1)
----- -----
(179) 441
________ ________
TAXATION (382) (326)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets (1,158) (791)
Payments to acquire intangible fixed assets - (1,013)
Loans advanced - (824)
Receipts from sale of tangible fixed assets 60 12
----- -----
(1,098) (2,616)
________ ________
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings (5,578) (1,294)
Net overdrafts acquired with subsidiary undertakings (1,976) (9)
----- -----
(7,554) (1,303)
----- -----
NET CASH OUTFLOW BEFORE FINANCING (6,990) (4,140)
________ ________
FINANCING
Proceeds from issue of ordinary share capital (6) 7,150 69
Repayment of short term and long term loans (2,129) -
Capital element of finance lease rental payments (537) (3)
----- -----
4,484 66
----- -----
REDUCTION IN CASH (7) (2,506) (4,074)
----- -----
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PRELIMINARY FINANCIAL STATEMENTS
These preliminary financial statements do not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985 and
are unaudited. The statements have been prepared on the same basis as
set out in the previous year's annual accounts, except as noted below.
In preparing the financial statements for the current year, the Company
has adopted FRS 18 "Accounting Policies" and FRS 19 "Deferred Taxation".
Adoption of FRS 18 and FRS 19 has not required any revision to the
financial statements in either the current or prior years.
Financial information for the 12 months ending 31 December 2001 has been
extracted from the statutory accounts which have been filed with the
Registrar of Companies. The auditor's report on those accounts was
unqualified and did not contain any statement under section 237 of the
Companies Act 1985. The audit report for the year ending 31 December
2002 has yet to be signed.
The preliminary financial statements for the year ending 31 December
2002 were approved by the Board on 24 February 2003.
2. turnover and segmental information
Unaudited
2002 2001
#'000 #'000
Turnover by geographical destination was as follows:
Existing operations:
United Kingdom 3,774 3,648
Rest of Europe 6,245 5,701
North America 21,055 22,266
Rest of the World 3,641 2,044
------ -----
Total existing operations 34,715 33,659
------ -----
Acquisitions:
United Kingdom 455 -
Rest of Europe 13,337 -
North America 7,975 -
Rest of the World 1,520 -
------ -----
Total acquisitions 23,287 -
------ -----
Total continuing operations 58,002 33,659
----- -----
3. operating LOSS
Unaudited
This is stated after charging: 2002 2001
#'000 #'000
Auditors' remuneration - audit services 165 95
Auditors' remuneration - other services 102 102
Research and development expenditure 3,018 3,173
Depreciation of owned assets 1,401 1,006
Depreciation of leased assets 230 -
Amortisation of intangible fixed assets 805 787
Amortisation of goodwill 3,896 2,303
Operating lease rentals for plant and machinery 228 22
Operating lease rentals for land and buildings 2,341 1,600
Provision for NIC on Share Option Scheme - (78)
---- ----
4. Tax on profit on ordinary activites
Unaudited
2002 2001
#'000 #'000
UK corporation tax charge(credit)
Current tax on income for the period 85 (411)
Adjustments in respect of prior periods - 113
_________ _________
85 (298)
Foreign tax charge
Current tax on income for the period 282 122
Adjustments in respect of prior periods (74) (86)
_________ _________
208 36
_________ _________
293 (262)
----- ----
5. LOSS PER ORDINARY SHARE
Unaudited
2002 2001
#'000 #'000
Loss for the year (3,811) (4,836)
Weighted average number of shares in the year 53,669,817 41,834,872
Basic and diluted loss per share (7.10p) (11.56p)
----- -----
6. reconciliation of movement in shareholders' funds
Share Profit &
Share Premium Loss Total
Capital Account Account #'000
#'000 #'000 #'000
At 1 January 2001 398 31,247 (90) 31,555
Arising on share issues 25 5,270 - 5,295
Retained loss for the year - - (4,836) (4,836)
Currency difference on translation of - - (190) (190)
assets
-------------- ------------- ------------ ----------
At 31 December 2001 423 36,517 (5,116) 31,824
Arising on share issues 118 7,032 - 7,150
Retained loss for the year - - (3,811) (3,811)
Currency difference on translation of - - (144) (144)
assets
-------------- ------------- ------------ ----------
At 31 December 2002 541 43,549 (9,071) 35,019
-------------- ------------- ------------ ----------
7. NOTES TO STATEMENT OF CASH FLOWS
a. Reconciliation of operating loss to net cash flow from operating activities:
Unaudited
2002 2001
#'000 #'000
Operating loss (3,339) (5,539)
Depreciation 1,631 1,006
Amortisation of goodwill and intangible 4,701 3,090
assets
Loss on disposal of tangible fixed assets 232 30
Decrease in debtors 4,029 528
(Decrease)increase in creditors and (4,887) 696
provisions
Share of loss of associate - 10
Write down investment in associate - 13
Exchange differences (144) (170)
_______ _______
Net cash flow from operating activities 2,223 (336)
---- ----
b. Reconciliation of net cash flow to movement in net funds.
Unaudited
2002 2001
#'000 #'000
Decrease in cash (2,506) (4,074)
Cash outflow from decrease in debt financing 2,666 3
----- -----
Change in net funds resulting from cash flows 160 (4,071)
Loan notes and finance leases acquired with subsidiaries (4,558) -
----- -----
Movement in net funds (4,398) (4,071)
Net funds at start of year 8,998 13,069
----- -----
Net funds at end of year 4,600 8,998
----- -----
(c ) Analysis of net funds
Finance Lease Cash Overdraft Loan Notes Total
#'000 #'000 #'000 #'000 #'000
At 1 January 2001 (11) 13,080 - - 13,069
Acquisition - - (9) - (9)
Cash flow 3 (4,074) 9 - (4,062)
-------- -------- -------- -------- --------
At 31 December 2001 (8) 9,006 - - 8,998
Acquisition (1,118) 505 (2,481) (3,440) (6,534)
Cash flow 537 (2,790) 2,260 2,129 2,136
-------- -------- -------- -------- --------
At 31 December 2002 (589) 6,721 (221) (1,311) 4,600
----- ---- ---- ---- ----
8. DIVIDEND
No dividend was paid and no dividend is proposed in respect of the year-ended 31
December 2002.
9. POST BALANCE SHEET EVENT
On 17 February 2003 the Company entered into a 15 year lease at an average
rental figure of approximately #664,000 a year over the first 5 years. This
allows for a rent-free period in the first year and a tenants option to break
after 10 years. This property will be utilised to amalgamate the Company's Head
Office and Maidenhead employees into one location and replaces various leases
expiring this year with a combined annual rental of approximately # 644,000.
This information is provided by RNS
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