SDL plc INTERIM REPORT 2012

SDL plc INTERIM REPORT
2012
INTERIM REPORT AND ACCOUNTS 2012
CONTENTS
Our Vision and Mission
2
Financial and Operational Highlights
4
Responsibility Statement by the Management Board
5
Executive Chairman’s Statement
6
Financial Trends
9
Independent Review Report to SDL plc
10
Interim Condensed Consolidated Income Statement
11
Interim Condensed Consolidated Statement of Comprehensive Income
12
Interim Condensed Consolidated Statement of Financial Position
13
Interim Condensed Consolidated Statement of Changes In Equity
14
Interim Condensed Consolidated Statement of Cash Flows
15
Notes to the Interim Condensed Consolidated Financial Statements
16
Corporate Information
25
Board of Directors
26
SDL Annual Report and
Financial
Statements
2012
SDL
plc Interim
Report 2012
11
OUR VISION AND MISSION
OUR VISION
SDL believes everyone should be able
to engage with the information they
require in the way that they want.
2
OUR MISSION
We enable global
businesses to engage
with their customers
in the language, the
media and at the
moment they choose.
We help businesses
manage their brands
and drive global
revenues, providing
enterprise-ready
innovative solutions
for managing the
end-to-end customer
experience.
SDL Annual Report and
Statements
2012
SDLFinancial
plc Interim
Report 2012
33
FINANCIAL HIGHLIGHTS
Unaudited
6 months to
30 June
2012
£’000
Unaudited
6 months to
30 June
2011
£’000
Change
%
133,573
111,489
+20%
Profit before tax and amortisation of intangible assets
20,421
18,664
+9%
Profit before tax
16,351
15,753
+4%
Earnings per ordinary share - basic (pence)
15.63
15.28
+2%
Adjusted earnings per ordinary share - basic (pence)
19.57
18.01
+9%
223,068
207,318
16,717
53,411
(22,190)
-
Income Statement:
Revenue
Financial Position:
Total equity
Cash and cash equivalents
Interest bearing loans and borrowings
OPERATIONAL HIGHLIGHTS
4
•
Good first half 2012, with both revenue and profit before taxation and amortisation in-line with
expectations
•
Headline revenue growth of 20%, with 8% organic and 12% attributable to the Alterian
acquisition
•
Strong revenue growth in Language Services (14%)
•
Several key new customer wins in the period with major global brands
•
Alterian integrating well into the group and performed somewhat ahead of expectations
•
Robust performance at the group level due to broad geography and sector coverage and the mix
of technology and services across the group
•
Our products continue to lead the world in innovation and our strategy is synchronised with
market needs, with SDL continuing to outperform industry leading names
RESPONSIBILITY STATEMENT
BY THE MANAGEMENT BOARD
We confirm that to the best of our knowledge:
•
the condensed set of financial statements has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU;
•
the interim management report includes a fair review of the information required by:
(a)
DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that
have occurred during the first six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b)
DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have
taken place in the first six months of the current financial year and that have materially affected the
financial position or performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
The directors of SDL plc can be found listed on page 25.
For and on behalf of the Board
Matthew Knight
Chief Financial Officer
SDL Annual Report and
Statements
2012
SDLFinancial
plc Interim
Report 2012
55
EXECUTIVE CHAIRMAN’S
STATEMENT
Summary Performance
I am pleased to report a good group performance
for the first half of 2012, ahead of the prior year, and
in line with our expectations for both revenue and
operating profit.
Revenue for the first half of 2012 was £133.6 million
(2011: £111.5 million) and profit before taxation
and amortisation of intangible assets (“PBTA”) was
£20.4 million (2011: £18.7 million) with profit before
taxation of £16.4 million (2011: £15.8 million). Net
debt at the end of the period amounted to £5.5
million (31 December 2011 net cash: £70.4 million).
Significant outflows in the period included the
acquisition of Alterian at £69.7m and payment of the
final dividend for 2011 of £4.6 million or 5.8p per
share.
Headline revenue growth was 20%, which comprised
8% organic revenue growth in the former SDL
businesses and 12% attributable to the Alterian
business. Currency had negligible impact on revenue.
Overall PBTA margin was 15.3% (2011: 16.7%),
reflecting the anticipated first year dilutive effect from
Alterian. PBTA margin for the former SDL business
was 16.6%.
We made excellent progress in our Services division,
with 14% organic growth, whilst our technology
division was broadly flat, the former confirming
SDL’s strong growth characteristics in a challenging
macro-economic climate. We grew revenue both in
established accounts as well as it being an extremely
strong half for new client wins which offset economic
weakness in Europe. Demand for cross-leveraged
solutions continued to grow as our clients seek more
integrated, innovative solutions that manage the
end-to-end customer experience across borders,
languages and cultures.
Cash generated from operations before one-off
Alterian acquisition related outflows was £9.5 million
(2011: £18.8 million). Cash flow is lower year on
year partially due to the effect of settling acquisition
related costs and historic liabilities in Alterian. We
also had good H1 exit activity levels in the business
6
creating high work in progress that will be converted
in the following half year. We expect SDL to be back
to historic levels of cash generation as we move
through 2013 with Alterian fully embedded into the
business.
Alterian Acquisition
The Alterian acquisition adds marketing analytics,
social media monitoring and campaign management
solutions to SDL’s Global Information Management
(GIM) platform. It performed ahead of our
expectations in the half sustaining good renewal
rates and delivering pro-forma six-month revenues
of £16.0 million. The acquisition enhances our GIM
solution by allowing our clients to analyse their
customers’ behaviours and interactions, significantly
enhancing web and multi-channel engagement.
Good integration progress has been achieved,
with planned activities completed to schedule in
the period. Operational cost savings have allowed
for further investment in future growth and the
augmentation of the organisation, particularly in
product development.
Content Management Technologies (contributing
£28.7 million or 21% revenue to the Group and £5.2
million or 25% of the PBTA) (2011: contributing £26.0
million or 23% revenue to the Group and £4.3 million
or 23% of the PBTA)
This segment comprises Web Content Management
Solutions, eCommerce Technologies and Structured
Content Technologies and achieved headline
revenue growth of 10% in the first half of 2012.
However, this was achieved through a 13% increase
from the web content management business
acquired from Alterian, offset by a decline of 3%
at constant currency against a very strong first half
in 2011. Currency effects were negligible. PBTA
margin was 18%. The Web Content Management
business sustained its competitive momentum with
performance stronger in North America and Asia
but weaker in Europe. Web Content Management
constant currency licence revenue growth was
8%. New wins in the period included VCE, MAPFRE
and TenCate. We continued to invest significantly
“The global macro-economic outlook remains uncertain with the structural weakness in Europe
remaining unresolved.This in turn has created a degree of caution in some of the markets we
operate in. Despite this we see growth opportunities in both the USA and Asia.
SDL has a well-diversified and broad portfolio of solutions and through new client wins and a
strong focus on execution we believe the Group will continue to show growth. We will maintain
our investments to implement our long term vision and strategy to create best of breed
technology and service solutions.”
in innovation during the period with a new user
interface launched for the SDL Tridion product, a
significant innovation that enables full control over
the digital ecosystem, spanning content creation,
targeting, multi-channel, translation, social media
interaction and site analytics. Structured Content
Management revenues were lower against a very
strong prior year. New wins included Electrolux and
BDR Thermea.
Language Services (contributing £75.2million or
56% of group revenue and £14.2 million or 69% of
PBTA) (2011: contributing £66.0 million or 59% of
group revenue and £12.0 million or 64% of PBTA)
Headline revenue grew impressively by 14% in
the first half of 2012, with negligible currency
effects. We experienced very strong new win
momentum, particularly in the USA. New wins in
the period included MAN Diesel, Maersk, Jyske Bank,
Language Technologies (contributing £19.5 million Bazaarvoice, Samsung Mobile, Tourism Australia
or 15% revenue to the Group and £1.5 million or 8% and Yamaha Motor Europe. We are pleased with the
of the PBTA) (2011: contributing £19.4 million or 18% development of our Asian business where our client
revenue to the Group and £2.4 million or 13% of the base grew significantly, and as a result we further
PBTA)
expanded our infrastructure in Japan, China, Korea
and Singapore to match increasing demand. We also
Headline Language Technologies revenues
expanded our centres in Poland and India which
were marginally ahead of the first half of 2011, a
are driving efficiencies across the Language Services
solid performance, with 1% organic growth at
business. Our opportunity pipeline remains strong.
constant currency offset by a negative impact of
1% from currency movements. PBTA margin was
PBTA margin was 18.8%, an increase of 0.6%, driven
7.9%, a reduction of 4.3% against prior year first
by increased volumes and improved efficiencies from
half, reflecting selective territory investment in
the deployment of increasing numbers of intelligent
growth markets, notably Asia, and our continued
Machine Translation post-edited solutions.
commitment to the development of leading statistical
machine translation capability.
Campaign Management, Analytics & Social
Intelligence (the main components of The Alterian
Sales increased in all product areas with the exception acquisition) (contributed £10.2million or 8% of
of US Government where activity levels were lower.
group revenue and £0.2million or 1% of PBTA) (not
New wins included ADP and GREE. We are pleased
present in 2011 comparatives)
with the strong uptake of our leading Desktop
translation product, Studio 2011. We continued to
This segment comprises marketing analytics,
see a steady transition from perpetual licences to
campaign management and social intelligence
Software as a Service (“SaaS”) models which will
technologies and is separately reported to enhance
enhance the visibility of revenue going forward and
shareholder visibility on performance.
is an important strategic growth driver. Cross sell
activity in the period with other SDL businesses was
The segment performed somewhat ahead of our
also a significant contributor, with sales to Bose,
expectations in the first half of 2012, delivering good
Danish Oil & Natural Gas, Schneider Electric and
renewals. This, coupled with realised operating
Thermo Fisher. We completed several key investments synergies has allowed us to increase our research and
in the period including expansion of our large scale
development investment thus enhancing the product
data processing capability and the opening of a new
platforms to deliver future growth. Operational
R&D facility in Cambridge, UK. These investments will and organisational capability has been significantly
continue to drive our market-leading capabilities in
enhanced in the period and business performance
machine translation.
has stabilised through effective execution of
integration plans.
SDL Annual Report andSDL
Financial
Statements
plc Interim
Report2012
2012
77
EXECUTIVE CHAIRMAN’S
STATEMENT CONTINUED
We had a number of excellent new wins in the
period including Abbott Laboratories, Citrix Online,
Newsmax, Princess Cruises and Camelot.
Efforts to drive cross sell with other SDL businesses
are growing pipeline and opportunity for this
segment. This segment is highly complementary to
SDL’s other businesses in providing a compelling
solution to drive customer experience.
Strategy for Global Information Management
Our strategic focus is to deliver an industry
leading solution for global customer experience
management through our Global Information
Management solution platform.
The Alterian acquisition enhances this capability
by adding compelling capability to listen, analyse
and orchestrate effective marketing. At our core
we enable global businesses to engage with their
customers, manage their brands and drive global
revenues, by providing enterprise-ready solutions for
managing the end-to-end customer experience.
The fundamental growth drivers of the business
remain unchanged: globalisation of business,
growth of the internet, especially in fast growing
economies where English is not the native language,
and exponential growth in digital content.
We operate in a world where, for companies to
thrive globally, the future is about delivering the
right content at the right time to a plethora of
mobile devices. Language and simplicity remains a
core differentiator of SDL’s products and services.
8
Outlook and Current Trading
The global macro-economic outlook remains
uncertain with the structural weakness in Europe
remaining unresolved. This in turn has created a
degree of caution in some of the markets we operate
in. Despite this we do see growth opportunities in
both the USA and Asia. SDL has a well-diversified
and broad portfolio of solutions and through new
client wins and a strong focus on execution we
believe the Group will continue to show growth.
We will maintain our investments to implement our
long term vision and strategy to create best of breed
technology and service solutions.
Mark Lancaster
Executive Chairman
SDL plc
14 August 2012
FINANCIAL TRENDS
REVENUE
PROFIT BEFORE TAX*
*before amortisation of intangible assets
£133.6m
12
£111.5m
11
09
08
£11.9m
08
OPERATING MARGINS*
OPERATING CASH FLOW
*before amortisation of intangible assets
15.3%
12
16.7%
10
17.3%
10
17.4%
09
15.6%
£5.3m*
£14.3m
11
09
08
£14.5m
09
£76.0m
11
£16.3m
10
£83.3m
12
£18.7m
11
£94.5m
10
£20.4m
12
£10.8m
£12.7m
£8.4m
08
*Excluding Alterian acquisition related outflows of £2.5m
KEY FINANCIAL METRICS
Revenue
£133.6m
20%
Profit Before Tax and Amortisation
£20.4m
9%
Adjusted Fully Diluted Earnings Per Share
19.57p
9%
Operating Cash Flow*
£5.3m
-63%
* Before one-off acquisition costs of £2.5m
SDL Annual Report andSDL
Financial
Statements
plc Interim
Report2012
2012
99
INDEPENDENT REVIEW REPORT TO SDL PLC
Introduction
Our responsibility
We have been engaged by the company to review the
condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2012
which comprises the Interim Condensed Consolidated
Income Statement, Interim Condensed Consolidated
Statement of Comprehensive Income, Interim Condensed
Consolidated Statement of Financial Position, Interim
Condensed Consolidated Statement of Changes in Equity,
Interim Condensed Consolidated Statement of Cash
Flows, and the related explanatory notes. We have read
the other information contained in the half-yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Our responsibility is to express to the company a
conclusion on the condensed set of financial statements in
the half-yearly financial report based on our review.
This report is made solely to the company in accordance
with the terms of our engagement to assist the company
in meeting the requirements of the Disclosure and
Transparency Rules (“the DTR”) of the UK’s Financial
Services Authority (“the UK FSA”). Our review has been
undertaken so that we might state to the company those
matters we are required to state to it in this report and for
no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other
than the company for our review work, for this report, or
for the conclusions we have reached.
Directors’ responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in
accordance with the DTR of the UK FSA.
As disclosed in note 1, the annual financial statements
of the group are prepared in accordance with IFRSs
as adopted by the EU. The condensed set of financial
statements included in this half-yearly financial report has
been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410
Review of Interim Financial Information Performed by the
Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim
financial information consists of making enquiries,
primarily of persons responsible for financial and
accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope
than an audit conducted in accordance with International
Standards on Auditing (UK and Ireland) and consequently
does not enable us to obtain assurance that we would
become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention
that causes us to believe that the condensed set of financial
statements in the half-yearly financial report for the six
months ended 30 June 2012 is not prepared, in all material
respects, in accordance with IAS 34 as adopted by the EU
and the DTR of the UK FSA.
P Gresham
for and on behalf of KPMG Audit Plc
Chartered Accountants
15 Canada Square
London
E14 5GL
14 August 2012
1010
INTERIM CONDENSED CONSOLIDATED
INCOME
STATEMENT
For the period ended 30 June 2012
Notes
Unaudited
6 months to
30 June
2012
£’000
Unaudited
6 months to
30 June
2011
£’000
23,882
19,744
40,632
109,691
91,745
188,369
Audited
Year to 31
December
2011
£’000
Continuing Operations
Sale of goods
Rendering of services
REVENUE
3
Cost of sales
GROSS PROFIT
Administration expenses - excluding amortisation of
intangible assets
OPERATING PROFIT BEFORE AMORTISATION OF
INTANGIBLE ASSETS
Administration expenses - amortisation of intangible
assets
OPERATING PROFIT
4
133,573
111,489
229,001
(56,560)
(46,794)
(95,397)
77,013
64,695
133,604
(56,495)
(46,112)
(94,189)
20,518
18,583
39,415
(4,070)
(2,911)
(5,903)
16,448
15,672
33,512
101
181
444
(198)
(100)
(195)
Finance revenue
Finance costs
PROFIT BEFORE TAX
Tax expense
5
PROFIT FOR THE PERIOD
16,351
15,753
33,761
(3,913)
(3,782)
(8,025)
12,438
11,971
25,736
£’000
£’000
Pence
Pence
Pence
Earnings per ordinary share – basic (pence)
6
15.63
15.28
32.72
Earnings per ordinary share – diluted (pence)
6
15.28
14.77
31.73
Adjusted earnings per ordinary share (basic and diluted) are shown in note 6.
SDL Annual Report andSDL
Financial
Statements
plc Interim
Report2012
2012
11
11
INTERIM CONDENSED CONSOLIDATED
STATEMENT
OF COMPREHENSIVE INCOME
For the period ended 30 June 2012
Unaudited
6 months to
30 June
2012
£’000
Unaudited
6 months to
30 June
2011
£’000
Profit for the period
12,438
11,971
25,736
Currency translation differences on foreign operations
(3,307)
4,113
(2,340)
(785)
(2,321)
(340)
150
236
110
Currency translation differences on foreign currency equity loans to
foreign subsidiaries
Income tax benefit on currency translation differences on
foreign currency equity loans to foreign subsidiaries
OTHER COMPREHENSIVE INCOME
(3,942)
2,028
(2,570)
TOTAL COMPREHENSIVE INCOME
8,496
13,999
23,166
All the total comprehensive income is attributable to equity holders of the parent company.
1212
Audited
Year to 31
December
2011
£’000
INTERIM CONDENSED CONSOLIDATED
STATEMENT
OF FINANCIAL POSITION
At 30 June 2012
Unaudited
30 June
2012
£’000
Unaudited
Audited
30 June 31 December
2011
2011
£’000
£’000
ASSETS
NON CURRENT ASSETS
9,731
6,790
6,415
242,952
160,475
155,144
Deferred tax asset
7,192
6,755
4,976
Rent deposits
1,116
919
951
260,991
174,939
167,486
67,620
47,127
52,247
1,106
1,463
509
16,717
53,411
70,408
85,443
102,001
123,164
346,434
276,940
290,650
Trade and other payables
(73,863)
(47,917)
(53,489)
Loans and overdraft
(22,190)
-
Current tax liabilities
(12,552)
(11,199)
(9,982)
Property, plant and equipment
Intangible assets
CURRENT ASSETS
Trade and other receivables
Current tax asset
Cash and cash equivalents
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Provisions
(534)
(945)
(839)
(109,139)
(60,061)
(64,310)
NON CURRENT LIABILITIES
Other payables
(3,922)
(1,311)
(1,102)
Deferred tax liability
(9,334)
(7,640)
(6,847)
Provisions
TOTAL LIABILITIES
NET ASSETS
(971)
(610)
(559)
(14,227)
(9,561)
(8,508)
(123,366)
(69,622)
(72,818)
207,318
217,832
223,068
EQUITY
Share capital
Share premium
Retained earnings
Foreign exchange differences
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
801
788
792
96,264
95,355
95,875
107,804
84,436
99,024
18,199
26,739
22,141
223,068
207,318
217,832
The Interim Financial Information presented in this Interim Report was approved by the Board of Directors on 14 August 2012.
SDL Annual Report andSDL
Financial
Statements
plc Interim
Report2012
2012
13
13
INTERIM CONDENSED CONSOLIDATED
STATEMENT
OF CHANGES IN EQUITY
For the period ended 30 June 2012
At 31 December 2010 (audited)
Share
Capital
Share
Premium
£’000
£’000
Foreign
Exchange
Differences
£’000
£’000
Total
£’000
780
94,974
75,047
24,711
195,512
Profit for the period
-
-
11,971
-
11,971
Other comprehensive income
-
-
-
2,028
2,028
Total comprehensive income
-
-
11,971
2,028
13,999
Deferred income taxation on share-based
payments
-
-
(334)
-
(334)
Tax credit for share options
-
-
523
-
523
Dividend paid
-
-
(4,328)
-
(4,328)
Arising on share issues
8
381
-
-
389
Share-based payments
-
-
1,557
-
1,557
788
95,355
84,436
26,739
207,318
Profit for the period
-
-
13,765
-
13,765
Other comprehensive income
-
-
-
(4,598)
(4,598)
Total comprehensive income
-
-
13,765
(4,598)
9,167
Deferred income taxation on share-based
payments
-
-
(487)
-
(487)
Arising on share issues
4
520
-
-
524
Share-based payments
-
-
1,310
-
1,310
792
95,875
99,024
22,141
217,832
Profit for the period
-
-
12,438
-
12,438
Other comprehensive income
-
-
-
(3,942)
(3,942)
Total comprehensive income
-
-
12,438
(3,942)
8,496
Deferred income taxation on share-based
payments
-
-
(180)
-
(180)
Tax credit for share options
-
-
355
-
355
Dividend paid
-
-
(4,638)
-
(4,638)
Arising on share issues
9
389
-
-
398
Share-based payments
-
-
805
-
805
801
96,264
107,804
18,199
223,068
At 30 June 2011 (unaudited)
At 31 December 2011 (audited)
At 30 June 2012 (unaudited)
These amounts are attributable to equity holders of the parent company.
1414
Retained
Earnings
INTERIM CONDENSED CONSOLIDATED
STATEMENT
OF CASH FLOWS
For the period ended 30 June 2012
Unaudited
6 months to
30 June
2012
£’000
Unaudited
6 months to
30 June
2011
£’000
Audited
Year to
31 December
2011
£’000
16,351
2,046
4,070
198
(101)
805
(5)
(5,224)
(7,429)
(1,233)
15,753
1,543
2,911
100
(181)
1,557
2
4,053
(6,798)
(142)
33,761
3,070
5,903
195
(444)
2,867
(1)
(1,099)
(1,616)
(1,506)
9,478
18,798
41,130
Alterian acquisition related cash outflows
(2,480)
-
-
CASH GENERATED FROM OPERATIONS
6,998
18,798
41,130
(4,186)
(4,529)
(8,517)
2,812
14,269
32,613
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire property, plant and equipment
Receipts from sale of property, plant and equipment
Payments to acquire subsidiaries
Net cash acquired with subsidiaries
Interest received
NET CASH FLOWS FROM INVESTING ACTIVITIES
(2,373)
16
(69,747)
571
170
(71,363)
(2,689)
12
(1,325)
180
(3,822)
(3,870)
88
(1,325)
417
(4,690)
FINANCING ACTIVITIES
Net proceeds from issue of ordinary share capital
Proceeds from borrowings
Repayment of borrowings
Dividend paid on ordinary shares
Repayment of capital leases
Interest paid
NET CASH FLOWS GENERATED FROM FINANCING ACTIVITIES
(DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS
398
22,190
(1,934)
(4,638)
(399)
(198)
15,419
(53,132)
389
(4,328)
(275)
(100)
(4,314)
6,133
913
(4,328)
(332)
(195)
(3,942)
23,981
MOVEMENT IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at start of the period
(Decrease) / increase in cash and cash equivalents
Effect of exchange rates on cash and cash equivalents
Cash and cash equivalents at end of the period
70,408
(53,132)
(559)
16,717
46,628
6,133
650
53,411
46,628
23,981
(201)
70,408
PROFIT BEFORE TAX
Depreciation of property, plant and equipment
Amortisation of intangible assets
Finance costs
Finance revenue
Share-based payments
(Gain) / loss on disposal of fixed assets
(Increase) / decrease in trade and other receivables
(Decrease) in trade and other payables and provisions
Exchange differences
CASH GENERATED FROM OPERATIONS BEFORE ONE-OFF
ALTERIAN ACQUISITION RELATED OUTFLOWS
Income tax paid
NET CASH FLOWS FROM OPERATING ACTIVITIES
SDL Annual Report andSDL
Financial
Statements
plc Interim
Report2012
2012
15
15
NOTES TO THE INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
Going Concern
Basis of preparation
The annual financial statements of the group are prepared
in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the EU. The interim
condensed consolidated financial statements for the six
months ended 30 June 2012 have been prepared on a
going concern basis in accordance with IAS 34 Interim
Financial Reporting.
As required by the Disclosure and Transparency Rules
of the Financial Services Authority, the condensed set
of financial statements has been prepared applying the
accounting policies and presentation that were applied in
the preparation of the company’s published consolidated
financial statements for the year ended 31 December 2011.
The preparation of condensed consolidated interim
financial statements in conformity with IFRSs requires
management to make judgements, estimates and
assumptions that affect the application of accounting
policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated
assumptions are based on historical experience and
various other factors that are believed to be reasonable
under the circumstances, the results for which form the
basis of making the judgements about carrying values
of assets and liabilities that are not readily available
from other sources. Actual results may differ from these
estimates.
The principal risks and uncertainties are consistent with
those disclosed in preparation of the Group’s annual
financial statements for the year ended 31 December 2011
and remain broadly unchanged. SDL has an established
process both to manage risk and seek to mitigate the
impact of risk as much as possible should it materialise.
Operational risks include management succession, system
interruption and business continuity, data protection,
compliance, contract management, integration of
acquisitions, maintaining technology leadership and
intellectual property. Financial risks include liquidity,
counterparties, interest rates and financial reporting.
Managing the risks associated with the successful
integration of Alterian has been an area of focus for
management during the period and this will continue to
be a focus in the second half of the year.
1616
In line with code requirements the Directors have made
enquiries concerning the potential of the business to
continue as a going concern. Enquiries included a review
of performance in 2012, 2012 annual plans, a review
of working capital including the liquidity position and
a review of current indebtedness levels. The Directors
confirm that 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 . BUSINESS COMBINATIONS
Acquisition of Alterian plc
On 27 January 2012 the Group acquired 100% of the
share capital of Alterian plc, a listed company based in the
United Kingdom. The principal activity of the Alterian plc
group is the provision of marketing analytics, social media
monitoring and campaign management.
The total cost of the combination was £73.2 million. £20
million of the cost of the acquisition was funded by draw
down of the Group facility and the remainder was funded
from the Group’s existing cash resources.
The provisional fair value of the identifiable assets and liabilities of the Alterian plc group as at the date of acquisition were:
Book value
Intangible assets
Unaudited
£’000
Provisional fair
value to Group
Unaudited
£’000
27,002
19,694
Property, plant and equipment
1,757
1,735
Trade receivables
9,185
9,185
Other receivables
1,195
1,129
Cash and cash equivalents
571
571
1,165
1,165
Trade payables
(2,982)
(3,022)
Overdraft
(1,934)
(1,934)
(24,443)
(25,692)
Deferred tax liabilities
(1,184)
(4,530)
Net assets / (liabilities)
10,332
(1,699)
Deferred tax asset
Other payables
Provisional Goodwill arising on acquisition
74,853
73,154
All fair values included in the above analysis are provisional fair values which are based upon management’s best
estimate at the date of preparation of the financial statements. The fair values are only provisional due to the proximity
of the acquisition to the date of the reporting period.
Discharged by:
£’000
Cash paid to shareholders
73,154
Exercise proceeds from employee share options
(3,407)
Total cash payable
69,747
Cash outflow on the acquisition:
Net cash and cash equivalents acquired with the subsidiary
571
Total cash paid
(69,747)
Net cash outflow
(69,176)
From the date of acquisition Alterian plc group has contributed £13.6 million of revenue and a profit of £0.7 million
to the net profit after tax of the Group. If the combination had taken place at the beginning of the year, the profit for
the Group would have been £12.6 million and revenue from continuing operations would have been £135.9 million.
Included in the £74.9 million of goodwill recognised above are certain intangible assets that cannot be individually
separated and reliably measured from the acquiree due to their nature. These items include assembled workforce and
buyer specific synergies.
SDL Annual Report andSDL
Financial
Statements
plc Interim
Report 2012
2012
17
17
NOTES TO THE INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Provisional Fair value of Calamares Holding B.V.
There have been no changes to the provisional fair value of the identifiable assets and liabilities of Calamares Group B.V.
during the reporting period. The 12 month period for making changes to provisional fair values elapsed in May 2012.
3. SEGMENT INFORMATION
The Group operates in the Global Information Management industry. For management purposes the Group is
organised into business units based on their products and services and has four reportable operating segments as
follows:
•
•
•
•
The Language Services segment is the provision of a translation service to customer’s multilingual content in
multiple languages.
The Language Technologies segment is the sale of enterprise, desktop and statistical machine translation
technology developed to help automate and manage multilingual assets together with associated consultancy
and other services.
The Content Management Technologies segment is the sale of content management technologies developed to
help automate and manage content to deliver a consistent, interactive and personalised customer experience, in
multiple languages, across websites, documentation, multiple media and channels.
The Campaign Management, Analytics and Social Intelligence segment is the sale of campaign management,
social media monitoring and marketing analytic technology together with associated consultancy and services.
Within the Content Management Technologies segment three operating segments have been aggregated to form the
above reportable operating segment. The new acquisition, Alterian plc, is split between the Content Management
Technologies and Campaign Management, Analytics and Social Intelligence segments.
Management monitors the operating results of its business units separately for the purpose of making decisions about
resource allocation and performance assessment prior to charges for tax and amortisation.
Six months ended 30 June 2012 (unaudited)
Total Revenue
Depreciation
Segment profit
before taxation
and Amortisation
£’000
£’000
£’000
£’000
Language Services
75,217
75,217
437
14,166
Language Technologies
19,482
19,482
915
1,536
Content Management
Technologies
28,713
28,713
330
5,157
Campaign Management, Analytics
and Social Intelligence
10,161
10,161
364
239
-
-
-
(677)
133,573
133,573
2,046
20,421
4,070
16,351
Adjustments and Eliminations*
Total
Amortisation
Profit before taxation
*Acquisition related costs
1818
External Revenue
Six months ended 30 June 2011 (unaudited)
External Revenue
Total Revenue
Depreciation
Segment profit
before taxation
and Amortisation
£’000
£’000
£’000
£’000
Language Services
66,042
66,042
576
12,002
Language Technologies
19,434
19,434
714
2,369
Content Management
Technologies
26,013
26,013
253
4,267
-
-
-
-
Campaign Management, Analytics
and Social Intelligence
-
-
-
26
111,489
111,489
1,543
Amortisation
18,664
2,911
Profit before taxation
15,753
Adjustments and Eliminations*
Total
* Net deferred consideration/ contingent consideration on acquisitions
Twelve months ended 31 December 2011 (audited)
External Revenue
Total Revenue
Depreciation
Segment profit
before taxation
and Amortisation
£’000
£’000
£’000
£’000
136,178
136,178
1,152
Language Technologies
40,096
40,096
1,397
5,246
Content Management
Technologies
52,727
52,727
521
8,780
Campaign Management, Analytics
and Social Intelligence
-
-
-
-
Adjustments and Eliminations*
-
-
-
98
229,001
229,001
3,070
Amortisation
39,664
5,903
Profit before taxation
33,761
Language Services
Total
25,540
*Deferred compensation relating to acquisitions
SDL Annual Report andSDL
Financial
Statements
plc Interim
Report2012
2012
19
19
NOTES TO THE INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Segment assets:
Unaudited
6 months to
30 June
2012
Unaudited
6 months to
30 June
2011
Audited
Year to
31 December
2011
£’000
£’000
£’000
60,931
51,760
54,227
Language Technologies
84,177
89,499
85,027
Content Management Technologies
74,541
74,052
75,503
101,770
-
Language Services
Campaign Management, Analytics and Social Intelligence
Adjustments and Eliminations
Total
25,015
346,434
(1)
61,629
276,940
(2)
75,893
290,650
(3)
(1) Segment assets do not include cash (£16,717,000), Corporation Tax (£1,106,000) and Deferred Tax (£7,192,000).
(2) Segment assets do not include cash (£53,411,000), Corporation Tax (£1,463,000) and Deferred Tax (£6,755,000).
(3) Segment assets do not include cash (£70,408,000), Corporation Tax (£509,000) and Deferred Tax (£4,976,000).
Revenue by geographical destination was as follows:
Unaudited
6 months to
30 June
2011
Audited
Year to
31 December
2011
£’000
£’000
£’000
United Kingdom
16,302
9,629
22,008
Rest of Europe
40,720
37,934
77,372
USA
51,514
44,112
89,185
Rest of North America
Rest of World
2020
Unaudited
6 months to
30 June
2012
8,155
8,903
17,605
16,882
10,911
22,831
133,573
111,489
229,001
4. OPERATING PROFIT
Unaudited
6 months to
30 June
2012
Unaudited
6 months to
30 June
2011
Audited
Year to
31 December
2011
£’000
£’000
£’000
10,591
7,081
14,763
62
(38)
84
1,589
1,244
2,536
Is stated after charging/(crediting):
Research and development expenditure
Bad debt charge / (credit)
Depreciation of owned assets
Depreciation of leased assets
Amortisation of intangibles
Operating lease rentals for plant and machinery
Operating lease rentals for land and buildings
Net foreign exchange differences
(Gain)/loss on foreign exchange derivatives
457
299
534
4,070
2,911
5,903
413
305
527
3,293
3,023
5,884
(1,339)
42
(1,544)
(36)
3
(441)
Unaudited
6 months to
30 June
2012
Unaudited
6 months to
30 June
2011
Audited
Year to
31 December
2011
£’000
£’000
£’000
1,411
5 . TAXATION
UK corporation tax:
1,278
1,317
Underlying Foreign Tax Credit
-
-
-
Adjustments in respect of prior periods
-
-
(16)
1,278
1,317
1,395
4.431
3,920
8,563
326
117
(575)
4,757
4,037
7,988
6,035
5,354
9,383
(2,122)
(1,572)
(1,358)
-
-
-
(2,122)
(1,572)
(1,358)
3,913
3,782
8,025
UK current tax on income for the period
Foreign tax:
Current tax on income for the period
Adjustments in respect of prior periods
Total current taxation
Deferred taxation:
Origination and reversal of timing differences
Adjustments in respect of prior periods
Total deferred taxation
Tax Expense
SDL Annual Report andSDL
Financial
Statements
plc Interim
Report 2012
2012
21
21
NOTES TO THE INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
A tax credit in respect of income tax credit on foreign currency translation differences on foreign currency loans to
foreign subsidiaries of £150,000 was recognised in the statement of other comprehensive income in the six months to
June 2012 (June 2011: £236,000; December 2011: £110,000).
A tax credit in respect of share based compensation for current taxation of £355,000 (June 2011: £523,000; December
2011: £523,000) has been recognised in the statement of changes in equity in the year. A tax charge in respect of share
based compensation for deferred taxation of £180,000 (June 2011: £334,000; December 2011: £821,000) has been
recognised in the statement of changes in equity in the period.
Due to the requirements of IAS 12, in conjunction with IFRS 2, the Schedule 23 tax credit for share options exercised and
deferred taxation on unexpired options have partly been recorded in equity. For the 6 months ended 30 June 2012 this
has the effect of increasing the effective tax rate by approximately +1.1% (at 30 June 2011: +1.2%; at 31 December 2011:
-0.9%).
6 . EARNINGS PER SHARE
Profit for the period attributable to equity holders of
the parent
Basic weighted average number of shares (million)
Employee share options and shares to be issued
(million)
Diluted weighted average number of shares (million)
2222
Unaudited
6 months to
30 June
2012
Unaudited
6 months to
30 June
2011
Audited
Year to
31 December
2011
£’000
£’000
£’000
12,438
11,971
25,736
m
m
m
79.6
78.3
78.7
1.8
2.7
2.4
81.4
81.0
81.1
Adjusted earnings per share:
Profit for the period attributable to equity holders of
the parent
Unaudited
6 months to
30 June
2012
Unaudited
6 months to
30 June
2011
Audited
Year to
31 December
2011
£’000
£’000
£’000
12,438
11,971
25,736
Amortisation of intangible fixed assets
4,070
2,911
5,903
Less: deferred tax benefit associated with amortisation
of intangible fixed assets
(936)
(771)
(1,564)
15,572
14,111
30,075
Adjusted profit for the period attributable to equity
holders of the parent
m
m
m
Basic weighted average number of shares (million)
79.6
78.3
78.7
Diluted weighted average number of shares (million)
81.4
81.0
81.1
Pence
Pence
Pence
Adjusted earnings per ordinary share – basic (pence)
19.57
18.01
38.23
Adjusted earnings per ordinary share – diluted (pence)
19.13
17.41
37.08
7 . DIVIDEND PER SHARE
Dividends paid in the six months ending 30 June 2012 were £4,637,540 (six months ending June 2011: £4,328,495;
twelve months ending December 2011: £4,328,495). The dividend paid amounted to 5.8 pence per ordinary share
(2011: 5.5 pence per share).
8. INTEREST-BEARING LOANS
On the acquisition of Alterian plc group the Group utilised the £20 million existing facility to partly fund the acquisition.
The Group subsequently replaced the £2 million of overdraft that existed in Alterian at the acquisition date with a
£2 million loan from a new facility of £7 million. These amounts are recorded in the balance sheet as liabilities.
9. SHARE-BASED PAYMENTS
On 10 April 2012, 667,356 Long Term Incentive Plan (LTIP) shares were awarded and 164,049 stock options were
awarded to certain key senior executives and employees of the SDL Group. The exercise price of the options of 748
pence represents the mid market price on the day before grant.
10. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
At 30 June 2012, 30 June 2011 and 31 December 2011 the Group had no derivative financial instruments.
SDL Annual Report andSDL
Financial
Statements
plc Interim
Report2012
2012
23
23
NOTES TO THE INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
11. GENERAL NOTES
The comparative figures for the financial year ended 31 December 2011 are not the company’s statutory accounts for
that financial year. Those accounts have been reported on by the company’s auditor and delivered to the registrar of
companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
12. EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE
There are no known events occurring after the statement of financial position date that require disclosure.
2424
CORPORATE INFORMATION
DIRECTORS
Mark Lancaster
John Hunter
Matthew Knight
(Executive Chairman)
(Chief Executive Officer)
(Chief Financial Officer)
Christopher Batterham*
Joe Campbell*
David Clayton*
Mandy Gradden*
* Non-executive directors
COMPANY SECRETARY
Pamela Pickering
REGISTERED OFFICE
Globe House
Clivemont Road
Maidenhead
Berkshire
SL6 7DY
Registered in England No. 2675207
REGISTRARS
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire
HD8 0LA
SDL Annual Report and
Statements
2012
SDLFinancial
plc Interim
Report 2012
25
25
BOARD OF DIRECTORS
Pictured from left to right:
Front row: John Hunter, Mark Lancaster and
Matthew Knight
Back row: Chris Batterham, David Clayton,
Mandy Gradden and Joe Campbell
26
SDL Annual Report andSDL
Financial
Statements
plc Interim
Report 2012
2012
27
EXECUTIVE DIRECTORS
Mark Lancaster, Executive Chairman, age 50
(Appointed: 31 January 1992)
Mark Lancaster founded the Group in 1992, having identified the need for a high-level technology and solutions
provider managing business’ content in global markets. Mark is a graduate in electrical and electronic engineering.
He started his career as an electronics and computer design engineer before moving into project management at Lotus
Development Corporation and later as international development director with Ashton-Tate. He is responsible for the
strategic direction of the Group.
John Hunter, Chief Executive Officer, age 46
(Appointed: 1 September 2008)
John Hunter is a Chartered Management Accountant and joined SDL in September 2008. Prior to this he held a number
of senior financial and management positions in Europe, Asia and the US within the ICI Group. Before joining SDL, he
was Chief Financial Officer of ICI Paints, a leading global decorative business. Since September 2008 John has been
Chief Financial Officer of SDL and was promoted effective 1 February 2011 to Chief Executive Officer.
Matthew Knight, Chief Financial Officer, age 41
(Appointed: 14 April 2011)
Matthew Knight took a BEng in Mechanical Engineering at Imperial College in 1993. He is a member of the Institute of
Chartered Accountants of England and Wales and qualified with Deloitte in 1996. Matthew has extensive experience of
the software and services industry and worked for Logica PLC where he held a variety of UK and international roles –
most recently Northern & Central Europe Chief Financial Officer.
28
28
NON-EXECUTIVE DIRECTORS
David Clayton, Senior Independant Director, age 55
(Appointed: 16 December 2009 – Re-appointed
23 April 2010)
David Clayton was Group Director of Strategy
and Corporate Development for SAGE plc. After
a career in senior executive roles at a number of
international technology companies he joined
BZW in 1995 where, after its merger with CSFB
in 1997, he was Managing Director and Head of
European Technology Research until 2004.
He joined the SAGE Board in June 2004 as a
Non-Executive Director before taking up his
executive role in October 2007.
Mandy Gradden, age 44
(Appointed: 30 January 2012)
Mandy Gradden was Executive VP and CFO at
the privately held retail technology company
Torex Retail Holdings Ltd. She is a chartered
accountant and was previously Group Finance
Director at the FTSE 250 business and technology
consultancy, Detica, prior to its acquisition by
BAE Systems.
Chris Batterham, age 57
(Appointed: 15 October 1999 – Re-appointed
23 April 2011)
Chris Batterham qualified as a Chartered
Accountant with Arthur Andersen and has
significant experience in the technology based
business environment, including the flotation
of Unipalm on the London Stock Exchange.
Currently working on the boards of a number of
companies including The Risk Advisory Group,
Office 2 Office plc, Iomart plc and Eckoh plc as
Chairman, Chris brings a wealth of experience in
the strategic development of companies within
the IT sector.
Joe Campbell, age 53
(Appointed: 1 July 2005 – Re-appointed
24 April 2011)
Joe Campbell was CEO of Trados for the year
before its acquisition by SDL in July 2005 when
he joined the board as a Non-Executive Director.
Prior to this he was COO of IManage, a publicly
traded company on the NASDAQ and is currently
on the Board of Sierra Systems Group Inc, an IT
and management consulting services company.
He adds a considerable level of expertise in
enterprise software sales and brings years of
experience of the US financial markets and M&A
activity.
None of the directors have been accused of, or been
reported as, acting in breach of professional conduct
by any Regulatory or Statutory Authority.
SDL Annual Report andSDL
Financial
Statements
plc Interim
Report2012
2012
29
29
SDL enables global businesses to engage with their customers in the language, the media
and at the moment they choose. We help businesses manage their brands, drive global
revenues, accelerate speed to market and enrich their customers’ experience.
SDL’s enterprise-ready innovative technology and service solutions span the entire customer
journey and include social listening and marketing analytics, campaign management,
language management and services, video and written content creation, web content
management, dynamic technical documentation publication and eCommerce.
SDL solutions drive global reach across multiple languages, cultures, channels and media.
SDL has over 1,500 enterprise customers, 400 partners and a global infrastructure of 70 offices
in 38 countries. For more information, visit www.sdl.com.
Copyright © 2012 SDL plc.
All Rights Reserved. All company product or service names
referenced herein are properties of their respective owners.
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30