TIDMSDL
RNS Number : 9747H
SDL PLC
06 August 2019
6 August 2019
SDL plc
("SDL" or the "Group")
Half Year results for the six months ended 30 June 2019
Successful strategic and financial execution
SDL plc (LSE: SDL), the global innovator in language translation
technology, services and content management, today announces its
half year results for the six months ended 30 June 2019.
Financial Highlights
Unaudited Results 1H19 1H18(4) Change
Six months to 30 June GBPm GBPm
------ -------- -------
Revenue 182.5 143.1 +28%
------ -------- -------
Proforma(1) +6%
------ -------- -------
Operating profit 11.9 7.8 +53%
------ -------- -------
Adjusted operating
profit(2) 16.1 12.0 +34%
------ -------- -------
Profit before tax 10.9 7.8 +40%
------ -------- -------
Basic earnings per
share 8.9p 6.8p +31%
------ -------- -------
Diluted earnings per
share 8.7p 6.7p +30%
------ -------- -------
Adjusted diluted earnings
per share(3) 12.3p 10.8p +14%
------ -------- -------
(1) Proforma is used for illustrative purposes based on
unaudited management accounts of the pre-acquisition period of
DLS
(2) Adjusted operating profit: Operating profit before
acquisition related amortisation and exceptional items (as
reconciled on the income statement)
(3) Adjusted earnings: Profit after tax before the impact of
exceptional items and acquisition related amortisation (as
reconciled in note 5)
(4) 1H18 results have not been restated for the impact of IFRS
16 - Leases (see note 1)
-- Revenue benefited from Pound Sterling to US Dollar exchange rate
-- Before IFRS 16 adjustments, adjusted operating profit was GBP15.5m
-- Group gross margin of 51.5% (1H18: 52.9%), reflecting
increased contribution to total revenue from Language Services
-- Net cash(5) at 30 June 2019 was GBP1.1m (31 December 2018:
GBP14.4m). At 31 July 2019, the Group's net cash balance was
GBP11.0m
Operational Highlights
-- The acquisition of Donnelley Language Solutions ("DLS")
(acquired in July 2018) has performed very well, accelerating SDL's
strategy and receiving positive feedback from customers and
employees
-- Positive momentum from sales and marketing strategy,
delivering growth in premium regulated services, strategic
accounts, machine translation and new customer wins
-- Strong growth in premium services(6) revenues to GBP52.0m
(1H18: GBP18.6m), accounting for 40% of Language Services revenues
(1H18: 20%)
-- Improved productivity in Language Services resulting in
higher gross margin at 42.1% (1H18: 41.8%), including presently
lower margin DLS
-- Further progress with the Language Services automation
programme, with 80% of addressable clients on Helix in June 2019.
Linguistic Utilisation(7) increased to 57.6% for the first half
(1H18: 54.3%)
-- Actions on corporate overheads and synergies on track to
deliver GBP8m of annualised savings by year end
-- Investment into market-leading innovations, including the
industry's first end-to-end, AI-enabled translation platform, SDL
Language Cloud, which will be launched in September
(5) Net cash: Net cash comprises cash and cash equivalents and
external borrowings
(6) Premium Services revenue: Comprises Regulated Language
Services (Finance, Legal, Life Sciences) plus Marketing
Solutions
(7) Linguistic Utilisation: The percentage of time in-house
linguists spent on billable work across the financial period
Adolfo Hernandez, CEO of SDL plc, said:
"We are pleased to have delivered a good start to the year,
which resulted in a 14% increase in adjusted diluted EPS over the
prior year, benefiting from the acquisition of DLS and strong
growth in key areas such as premium services and machine
translation. During the first half, we continued to deliver on our
transformation strategy, including the roll out of our automation
programme, Helix, and completed the development of our next
generation end-to-end translation platform, SDL Language Cloud,
ahead of its launch in September. We enter the traditionally
stronger second half with good sales momentum and a healthy sales
pipeline. This, alongside the actions that we are taking on
productivity, gives us confidence of delivering improved
profitability for the full year, in line with management
expectations."
Enquiries
SDL plc 01628 410100
Adolfo Hernandez, CEO
Xenia Walters, CFO
Luther Pendragon 0207 618 9100
Harry Chathli, Claire Norbury,
Alexis Gore
Analyst Presentation
Adolfo Hernandez, Chief Executive Officer, and Xenia Walters,
Chief Financial Officer, will be holding an analyst presentation at
9.00am today at Investec, 30 Gresham Street, London, EC2V 7QP.
About SDL
SDL (LSE: SDL) is the global leader in content creation,
translation and delivery. For over 25 years we've helped companies
communicate with confidence and deliver transformative business
results by enabling powerful experiences that engage customers
across multiple touchpoints worldwide. Find out why 90 of the top
100 global companies work with and trust us on SDL.com. Follow us
on Twitter, LinkedIn and Facebook.
Operational review
SDL achieved a good start to the year, with adjusted operating
profit (pre-IFRS 16) growth of 29% and sales growth of 28%,
benefiting from the acquisition of DLS in July 2018 and favourable
exchange rates. On a proforma basis, revenues increased by 6%.
The Group increased its penetration of target 'premium' sectors
of financial services, life sciences, legal services and marketing.
This has been achieved both organically and through the acquisition
of DLS, which has proven to be an excellent fit. Premium services
revenues accounted for 40% of Language Services revenues in the
period, up from 20% in 1H18. The business has continued to focus on
driving cross-selling across its extensive enterprise customer
base, as well as improving the new client win rate. Machine
Translation sales grew 10% year-on-year. SDL enters the second half
with a healthy pipeline of services and technology deals.
Operationally, SDL remains focused on increasing customer
satisfaction, improving the productivity and margins of the
Language Services business, reducing Group operating overheads that
relate to legacy processes, delivering the synergies from the
acquisition of DLS and making SDL a great place to work. Language
Services gross margin, which is the key indicator of productivity
in the segment, improved slightly to 42.1% in the first half, but
included DLS, which presently reports lower gross margins due to
its outsourced model. The integration of DLS is on track and should
deliver benefits in areas such as linguistic insourcing, which was
commenced towards the end of the first half. Finally, the necessary
steps have been taken to deliver corporate and back-office savings
and the Group is on track to deliver the anticipated GBP8m of
annualised gross cost savings and synergies by the end of the year,
which will allow re-investment in innovation.
SDL has invested across its technology portfolio. A significant
focus in the half has been on the development of SDL Language Cloud
ahead of its launch in September. This is the industry's first,
cloud-based, end-to-end AI-enabled translation platform. Also in
the area of AI, further important strides have been made in the
areas of Neural Machine Translation and Natural Language
Processing, which are being deployed across all of SDL's business
segments. These investments will enable SDL and its customers to
meet the challenges of content volume and velocity that are
becoming the new norm in the industry.
Segment performance
SDL helps customers create, translate and deliver content
globally, at scale, on time and at the right quality, by deploying
market-leading services, technologies and solutions.
Language Services Language Technologies Content Technologies
1H19 1H18 1H19 1H18 1H19 1H18
---------- --------- ----- --------- --------- ----- --------- --------- ----
Revenue GBP128.4m GBP91.8m +40% GBP25.6m GBP24.0m +7% GBP28.5m GBP27.3m +4%
---------- --------- ----- --------- --------- ----- --------- --------- ----
Gross profit
margin 42.1% 41.8% +0% 78.3% 77.1% +1% 69.9% 68.9% +1%
---------- --------- ----- --------- --------- ----- --------- --------- ----
Adj. Operating
Profit GBP12.0m GBP9.9m +21% GBP5.2m GBP3.7m +41% GBP7.2m GBP7.5m -4%
---------- --------- ----- --------- --------- ----- --------- --------- ----
Language Services
SDL is one of the world's largest Language Service Providers,
with more than 1,400 in-house translators and a pool of over 17,000
freelancers and vendors. It provides a full suite of services to
localise content and make it relevant for global audiences.
Language Services revenue grew by 40%, aided by DLS, with a
repeat revenue rate of 96%. The repeat revenue rate is defined as
revenues earned from prior year customers as a percentage of
current year Language Services revenue.
Language Technologies
SDL is the market leader in Translation Management and
Translation Productivity software and is a pioneer of Natural
Language Processing Artificial Intelligence, which is applied in
its Machine Translation and Linguistic AI platforms. The
technologies are licensed to generate revenues as well as being
used internally to improve the profitability of SDL's Language
Services.
Language Technologies revenue grew by 7%, with recurring revenue
also increasing by 7%. Sales of SDL Machine Translation grew by 10%
year-on-year.
Content Technologies
SDL uses content technologies to enable enterprise-level content
management. Its Structured Content and Web Content Management
Systems are designed to meet the challenges of operating in a
global business environment.
Content Technologies revenue grew by 4%, with recurring revenue
also increasing by 4%, including a strong performance by Contenta
Publishing Suite, an integrated publishing solution for technical
content.
Delivering on strategy
The Group's commercial focus in 2019 is on increasing
penetration of existing customers, through cross-selling and
account management, increasing revenues in higher-growth premium
sectors and increasing new customer wins. Operationally, the focus
is on improving productivity - particularly through the Helix
automation programme - and progressing the integration of DLS.
Deepening client relationships
In the first half, on a proforma basis, the Group's top 10
customers grew revenues by 20% over the same period last year, with
145 cross-sell and up-sell deals compared with 88 in 1H18. This
growth is the result of factors such as the increasing demand for
Language Services driven by globalisation and international trade,
the trend towards digitisation and greater use of technology, and
outsourcing by corporates of all or part of their translation,
localisation and linguistic processes. SDL's leading position and
reputation in premium regulated sectors and the ability to broaden
and deepen client relationships through the sale of additional
products and services has driven organic growth and cross-selling.
On a day-to-day basis, customers demand high levels of service and
technical support, but more customers are also recognising SDL's
ability to work with them strategically and bring a solutions
approach to a broad range of content challenges. Furthermore, SDL
is pleased to report that its Net Promoter Score in June 2019 rose
to 39 (Dec 2018: 30).
Premium segment growth
Penetration of SDL's target premium sectors of financial
services, life sciences, legal services and marketing, has
increased, with sales growing from GBP18.6m in 1H18 to GBP52.0m in
1H19. This has been achieved organically and through the
acquisition of DLS. Premium services revenues accounted for 40% of
Language Services revenues in the period, up from 20% in the first
half of the prior year. Specifically, financial services revenues
benefited from the DLS acquisition, good levels of market activity
and SDL's competitive differentiators such as security and 24/7
coverage. In Life Sciences, the consolidation of the former SDL and
DLS business units further strengthened global sales and delivery
capabilities, and SDL is bringing differentiated solutions to
sectors such as Clinical Research Organisations and Managed Care.
SDL Marketing Solutions, which provides global content production
services, is gaining significant traction, with wins both via
direct sales and via agency relationships. Finally, there are
encouraging opportunities in the legal sector, where there is a
strong fit for SDL solutions in areas such as litigation and legal
digitalisation. The good performance in these premium areas offset
some weakness in certain segments and geographies, notably
automotive, manufacturing and related segments in the UK and
Europe, which have been impacted by macro-economic factors.
Increasing new customer wins
In addition to growing the existing base, significant effort has
been applied to increase the pipeline of new business, particularly
in EMEA and APAC. In the first half, Language Services revenues
from new business rose significantly and 60% of the closed pipeline
in Language Services in these regions were from new customers, some
of which will ramp up in the second half.
Improving productivity
Operationally, SDL remains focused on improving the productivity
and margins of the Language Services business, reducing Group
operating overheads that relate to legacy processes and delivering
the synergies from the acquisition of DLS. Language Services gross
margin, which is the key indicator of productivity in the segment,
improved slightly to 42.1% in the period (1H18: 41.8%), but
included DLS, which presently reports lower gross margins due to
its outsourced model.
The Helix automation programme continues to make good progress
with 80% of addressable clients being onboarded onto Helix. To
date, over 24,000 vendor applicants have been processed through
SDL's WorkZone portal, enabling SDL to continually refresh its
vendor community in an efficient manner whilst improving vendors'
experience of the process. SDL's recently created Global Language
Office is underpinned by the platform as was the quick and
efficient integration of DLS into SDL's Language Services
business.
SDL continues to execute its data strategy with increasing
sophistication in the Group's Business Intelligence. Project cost
controls, customer profitability, work-mix and skills-required
analysis are significantly improved. Analytics to predict the size
of work by client, in order to 'pre-load' the delivery pipeline,
are also in the early stages of development.
With new data being collected in real-time, this data is already
being shared with a number of SDL's largest customers as they seek
to improve the two-way flow of information. Early implementations
have proved to be valuable to both parties.
DLS integration
It is now a year since DLS was acquired and the business is now
well embedded into the Group. Support functions have been fully
integrated and facilities consolidated. Operations have been
carefully aligned in order to leverage best practice, whilst
minimising disruption. Helix has been integrated into DLS's
delivery system and delivery platforms will be consolidated in the
second half. Insourcing of projects to SDL's language offices has
been initiated and will ramp up during the rest of the year.
Employee engagement
The team at SDL continues to maintain its relentless dedication
to being the best it can be. This places huge demands on the
Group's employees, and management is grateful for their tenacity
and commitment. The feedback from SDL's latest employee survey is
most encouraging and suggests that employees are very motivated
from the results their efforts are delivering.
Investments in Innovation and Security
Following a period of investment in upgrading the Group's
internal software platform, SDL is now able to shift a higher
proportion of R&D spend towards innovation. 64% of R&D
expense was dedicated to new feature development, a 25% increase on
the prior year, whereas just 13% was spent on modernising existing
architectures, a 50% reduction on last year. This is enabling SDL
to further extend its competitive lead.
Language Technologies
The focus of the first half was the development of SDL Language
Cloud - SDL's next-generation, end-to-end intelligent translation
platform that is designed to combine best-in-class and
enterprise-grade translation technologies and being adapted to new
industry demands. These new demands include 'continuous
localisation', machine-first, human-optimised workflows and rich
data. SDL Language Cloud builds on years of market leadership in
software across the whole translation supply chain and is the
industry's first, cloud-based, end-to-end AI-enabled translation
platform. The launch of SDL Language Cloud is expected in September
and will be targeted at new customers. SDL will continue to support
its other existing Translation Management software platforms.
In the second half of 2019, SDL will also release its new SDL
Trados GroupShare server solution, adding powerful functionality
including an enhanced online editor and project management
streamlining. SDL Trados Studio will also see a major service
release that will add, amongst other features, connectivity to SDL
Language Cloud and integration with SDL MultiTrans.
SDL continues to invest and innovate in Neural Machine
Translation and Linguistic AI and Natural Language Processing,
which are being deployed across all of SDL's business segments. In
June, the availability of 'Adaptable Language Pairs' in the next
release of Enterprise Translation Server was announced, an
innovation which enables enterprises to train their own language
pairs for any project, department or industry in an easy and secure
manner. In the first half, SDL won "Best Machine Translation
Solution" from AI Breakthrough, a leading market intelligence
organisation.
Content Technologies
In 1H19, the Group executed on its strategy for SDL Tridion DX
to support customers as they navigate the content supply chain,
focusing on areas such as post-purchase experience and sustaining
quality customer relationships over time to improve customer
lifetime value. In the second half of the year, development is
focused on upcoming 2020 releases, which include authoring
experience and collaboration tools and the Tridion connector
framework, which will open up Tridion to new market segments.
In SDL's Contenta Publishing Suite, investments were made in
cloud enablement and extending functionality for the complex and
specialised demands of aerospace, defence, government and financial
services customers. Although a standards-driven market segment, SDL
is able to deliver high levels of differentiation and is seeing
major customers standardise on SDL's technology.
Security
Security is of critical importance to SDL and the Group has been
investing in building the highest level of compliance with
regulations such as GDPR, PCI DSS, ISO27001 and SOC 2.
SDL's security is tailored to provide reliable services -
maintaining high availability and quick recovery in the event of
disruption. A particular area of focus is regulated industries such
as financial services, life sciences and the legal sector: for
example, SDL has provided an additional layer of security for these
sectors by certifying its Translation Management System language
product as HiTrust compliant. SDL cloud operations are ISO27001
certified for all hosted products and the Group has achieved 100%
compliance with the controls and objectives of the SOC 2 Type 2
attestation. SDL intends to further enhance its security with
certification of its cloud services in 2020.
Financial review
SDL delivered good progress in its financial performance in the
first half of 2019.
Revenue
Group revenue grew by 28% to GBP182.5m, driven by organic growth
and DLS, as well as currency tailwinds. SDL continues to benefit
from a diverse mix of regions, industry verticals and customers.
While the Group has achieved good growth in premium vertical
industries, there has been some slowdown in the manufacturing and
automotive industries within EMEA, which may continue into the
second half.
Annual Recurring Revenue ("ARR") for SDL's technology businesses
consists of SaaS licence, hosting and support and maintenance
revenues. ARR of GBP62.7m improved 3% on 1H18. Given that a number
of SDL's term licences are contracted over three to five years and
fees are paid over the lifetime of the contract, SDL also measures
Annual Recurring Contract Value ("ARCV"), which includes cash flows
arising from term licence fees. In 1H19, ARCV was GBP69.9m, which
represents a 5% increase on 1H18.
Gross profit margin
Gross profit margin of 51.5% is marginally below the prior year
due to the dilutive impact of consolidating the DLS business into
the Group results and the mix factor of Language Services being a
relatively higher share of overall revenues compared with the
proportion of technology revenues, which generate a higher gross
margin.
Gross profit margin within the Group's largest division,
Language Services, improved from 41.8% in 1H18 to 42.1% in 1H19,
including the impact of the DLS acquisition that was, and still is,
margin dilutive. The year-on-year improvement reflects the adoption
of the Group's business process automation platform (Helix),
optimisation of SDL's resourcing model, continued strong usage of
machine translation and better controls over freelancer
expenditure. These initiatives have led to a reduction in the use
of external linguists and improved productivity from the Group's
internal operations, which is evidenced by the increased
productivity among its linguistic community where utilisation
increased to 57.6% in 1H19 (1H18: 54.3%). Integration activities in
2019 are focused on applying the existing SDL operating model to
DLS to drive gross margin expansion. This will be achieved through
the application of technology, namely Helix and machine
translation, in addition to utilising SDL's in-house resourcing
pool of over 1,400 linguists.
Gross profit margin within Language Technologies of 78.3% was
higher than the 77.1% of the prior year, while Content Technologies
improved from 68.9% to 69.9%.
Overheads and cost savings programme
Reported overheads increased by GBP14.2m to GBP82.1m.
Incremental costs relating to DLS amounted to GBP9.3m, with the
remaining increase in costs driven by inflationary increases
(GBP3.1m), incremental net R&D investment (GBP1.7m) and focused
investment in SG&A to drive SDL's strategic objectives.
As announced last year, SDL has been taking actions to reduce
operating costs by streamlining and optimising corporate overheads
and delivering back-office and facilities synergies from the
acquisition. To date, the Group has delivered annualised synergies
and cost savings from the acquisition of GBP5.5m through actions
such as facilities consolidation, simplifying and standardising
business processes, and removing legacy and duplicate systems. In
addition, corporate costs in 1H19 were reduced to GBP8.3m from
GBP9.1m for the first half of the prior year.
SDL remains on track to deliver annualised gross cost savings of
GBP8m by the end of 2019. Exceptional costs in the first half were
GBP2.1m. A proportion of these underlying cost savings will be
re-invested into growth areas, such as SDL Language Cloud.
Adjusted operating profit
Adjusted operating profit of GBP16.1m (1H18: GBP12.0m), with
adjusted operating profit margin of 8.8% (1H18: 8.4%), is before
exceptional items of GBP2.1m and amortisation of acquired
intangibles of GBP2.1m. Pre IFRS 16, adjusted operating profit and
margin were GBP15.5m and 8.5% respectively.
Taxation
The 1H19 tax charge was GBP2.9m (1H18: GBP2.2m) and represents
an adjusted effective tax rate of 25.3% (1H18: 24.7%). Total cash
tax paid in 1H19 was GBP3.5m (1H18: GBP1.2m) with total tax cash
paid in 2019 expected to be in the region of GBP10m - GBP11m as a
result of resolving historical tax filings and has been provided
for within these financial statements (see note 4).
The Group's underlying effective current tax rate going forward
is expected to be in the region of 23% to 25% (due to the proposed
UK tax rate reduction from 19% to 17% from 1 April 2020, which will
contribute to a lower Group ETR over the medium term).
Earnings per share
Adjusted diluted EPS increased 14% to 12.3p as a result of
improved trading. Basic EPS was 8.9p, a 31% increase on the prior
year, reflecting underlying profit growth and a reduction in
exceptional costs.
Cash flow, funding and net cash
Adjusted operating cash flow was GBP9.0m (1H18: GBP16.2m), with
a GBP13.6m working capital outflow (1H18: GBP5.0m inflow)
principally due to a GBP6.0m net outflow of variable compensation,
a GBP7.8m increase in work-in-progress ("WIP") and a GBP1.3m
increase in trade receivables. The increase in WIP is attributable
to the nature of DLS customer projects, which are larger and longer
term in nature and therefore drive an extended order to cash
cycle.
Total capital expenditure of GBP5.3m includes payments for
maintenance capital expenditure (GBP0.5m), R&D (GBP3.7m) and
investment capital expenditure (GBP1.1m).
The cash impact of exceptional items amounted to GBP2.0m (1H18:
GBP2.9m). Dividends of GBP6.3m paid in the period (1H18: GBP5.1m)
comprised the dividend for 2018 of 7.0p per ordinary share.
The Group's cash balances at 30 June 2019 amounted to GBP13.1m
with external borrowings of GBP12.0m (31 December 2018: GBP19.8m
cash and GBP5.4m external borrowings; 30 June 2018: GBP22.5m cash
and no external borrowings), resulting in net cash of GBP1.1m (31
December 2018: GBP14.4m net cash; 30 June 2018: GBP22.5m net cash).
Post period, net cash increased to GBP11.0m as at 31 July 2019.
The Group's debt is sourced from a GBP120m syndicated
multi-currency Revolving Credit Facility ('RCF'). The agreement
also includes the provision of a GBP50m uncommitted Accordion
facility and expires on 17 July 2023. Borrowings drawn down under
the RCF are currently subject to interest at 1.15% over LIBOR.
There is a leverage covenant limit of 4.0x which is measured
quarterly.
The Group signed a GBP1m unsecured overdraft facility on 31 July
2019. Prior to this date, no facility was in place. Borrowings on
this facility are subject to interest at 1.75% over base rate and
are repayable on demand.
Capital structure
The Board believes in maintaining an efficient but prudent
capital structure, whilst retaining the flexibility to make
value-enhancing acquisitions. The Board's main strategic priority
remains organic growth, supported by targeted bolt-on
acquisitions.
Brexit impact
Although uncertainty remains as to the outcome of the Brexit
negotiations between the UK and EU, the Group has adopted an
approach that it believes will allow it to manage the risks and
opportunities that Brexit brings.
Due to the already global nature of SDL's business and service
capabilities across the globe, SDL does not currently consider that
it will be materially impacted by the UK's departure from the EU,
but notes that the Group has an exposure to UK manufacturing and
automotive customers and is mindful of the impact of Brexit on
these customers.
Accounting developments
IFRS 16 is the new lease accounting standard and has been
implemented on 1 January 2019. The most significant impacts of the
new accounting standard are the recognition of operating lease
liabilities on the balance sheet and the segmentation of the lease
charge to depreciation and interest.
As a result of the initial application of IFRS 16, in relation
to the leases that were previously classified as operating leases,
the Group recognised GBP23.5m of right-of-use assets and GBP23.5m
lease liabilities as at 1 January 2019. The Group has elected not
to restate the 2018 comparatives in line with the transitional
exemptions available. As a result of IFRS 16, the Group has
recognised depreciation and interest costs instead of operating
lease expense. During the six months ended 30 June 2019, the Group
recognised GBP3.2m of depreciation charges and GBP0.6m of interest
costs from these leases.
Going Concern Statement
The Group's business activities, performance and position,
together with the factors likely to affect its future development,
are set out in the Group's Strategic Report in its 2018 Annual
Report. The Board is responsible for determining the nature and
extent of the principal risks it is willing to take in achieving
its strategic objectives. The processes in place for assessment,
management and monitoring of risks are described in the 2018 Annual
Report. Details of the financial risk management objectives and
policies of the Group are also given in the 2018 Annual Report.
The Board believes that the Group is well placed to manage its
business risks successfully going forward. The Board's assessment
of prospects, together with its review of principal risks and the
effectiveness of risk management procedures, show that the Group
has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the Directors continue to adopt
the going concern basis for the preparation of the financial
statements. In forming their view, the Directors have considered
the Group's prospects for a period exceeding 12 months from the
date when the financial statements are approved.
Outlook
The Group continues to make progress in improving customer
satisfaction and delivering on its business transformation. Many of
the initiatives that the Executive team has been focused on over
the past few years are now bearing fruit. The Group believes that
the investments it has been making since 2016 across sales and
marketing, business processes, people and infrastructure, and in
its solutions will result in long-term growth, higher margins and
greater competitive differentiation.
Successful mergers such as DLS will allow SDL to accelerate the
delivery of its strategy, as demonstrated by these results. The
Group continues to monitor the market for other non-organic
opportunities that will similarly accelerate the achievement of its
long-term goals.
The Group entered the second half, its traditionally stronger
period, with good sales momentum and a healthy sales pipeline. The
Pound Sterling to US Dollar exchange rate also is benefitting the
Group and will continue to have a favourable impact on revenues and
profits if current rates are maintained through the second half of
this year.
The good pipeline visibility and sales activity, alongside the
actions being taken on productivity, gives the Group confidence
that it will deliver improved profitability for the full year, in
line with management expectations.
Cautionary statement
Certain statements in this interim management report constitute,
or may be deemed to constitute, forward-looking statements
(including beliefs or opinions). Any statement in this interim
management report that is not a statement of historical fact
including, without limitation those regarding the Group's future
expectations, operations, financial performance, financial
condition and business, is a forward-looking statement. Such
forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially. These risk and
uncertainties include, among other factors, changing economic
financial, business or other market conditions. These and other
factors could adversely affect the outcome and financial effects of
the plans and events described in this results announcement. As a
result, you are cautioned not to place reliance on such
forward-looking statements.
Except as is required by the Listing Rules, Disclosure and
Transparency Rules and applicable laws, no undertaking is given to
update the forward-looking statements contained in this interim
management report, whether as a result of new information, future
events or otherwise.
Nothing in this interim management report should be construed as
a profit forecast. This interim management report has been prepared
for the Group as a whole and therefore gives greater emphasis to
those matters which are significant to SDL plc and its subsidiary
undertakings when viewed as whole.
This announcement is released by SDL plc and contains inside
information for the purposes of Article 7 of the Market Abuse
Regulation (EU) 596/2014 ("MAR"), encompassing information relating
to trading for the Group's expected results for the financial year
ending 31 December 2019, and is disclosed in accordance with the
Group's obligations under Article 17 of MAR.
SDL plc
Condensed Consolidated Income Statement
Unaudited Unaudited
6 months 6 months to
to 30 June 2018
30 June 2019
Notes GBPm GBPm
Sale of goods 20.1 20.1
Rendering of services 162.4 123.0
-------------- --------------
REVENUE 2 182.5 143.1
Cost of sales (88.5) (67.4)
-------------- --------------
GROSS PROFIT 94.0 75.7
Administrative expenses (82.1) (67.9)
-------------- --------------
OPERATING PROFIT 3 11.9 7.8
-------------- --------------
Operating profit
before exceptional
items and amortisation
of acquired intangibles 16.1 12.0
Exceptional items 3 (2.1) (3.7)
Amortisation of
acquired intangibles 3 (2.1) (0.5)
OPERATING PROFIT 11.9 7.8
-------------------------- ------ -------------- --------------
Finance expense (1.0) -
PROFIT BEFORE TAX 10.9 7.8
Tax expense 4 (2.9) (2.2)
--------------
PROFIT FOR THE PERIOD 8.0 5.6
-------------- --------------
EARNINGS PER SHARE
Basic 8.9p 6.8p
-------------- --------------
Diluted 8.7p 6.7p
-------------- --------------
SDL plc
Condensed Consolidated Statement of Comprehensive Income
Unaudited Unaudited
6 months 6 months
to to
30 June 30 June
2019 2018
GBPm GBPm
Profit for the period 8.0 5.6
---------- ----------
Currency translation differences on foreign
operations (1.1) (0.7)
Currency translation differences on foreign
currency equity loans to foreign subsidiaries (0.3) -
Other Comprehensive Income (1.4) (0.7)
---------- ----------
Total Comprehensive Income 6.6 4.9
---------- ----------
Total comprehensive income is attributable to equity holders of
the parent company. A currency translation difference on a foreign
operation may be reclassified to the Income Statement upon disposal
of that operation.
SDL plc
Condensed Consolidated Statement of Financial Position
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
ASSETS
NON-CURRENT ASSETS
Intangible assets 221.7 158.4 222.9
Property, plant and equipment 10.0 8.8 9.1
Right of use asset 19.8 - -
Deferred tax assets 8.0 10.1 8.9
Other receivables 2.7 1.6 2.4
Capitalised contract assets 0.9 0.9 0.8
263.1 179.8 244.1
---------- ---------- -------------
CURRENT ASSETS
Trade and other receivables 118.1 88.4 108.3
Capitalised contract assets 1.9 1.9 1.9
Tax assets 6.6 1.9 6.6
Cash and cash equivalents 13.1 22.5 19.8
139.7 114.7 136.6
---------- ---------- -------------
TOTAL ASSETS 402.8 294.5 380.7
---------- ---------- -------------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (99.8) (83.9) (105.1)
Lease liabilities (3.8) - -
Current tax liabilities (10.1) (9.9) (11.2)
Provisions (0.5) (1.2) (0.7)
(114.2) (95.0) (117.0)
---------- ---------- -------------
NON-CURRENT LIABILITIES
Other payables (0.7) (0.9) (0.7)
Lease liabilities (16.6) - -
Borrowings (12.0) - (5.4)
Deferred tax liabilities (8.3) (1.6) (8.7)
Provisions (3.6) (2.9) (3.3)
---------- ---------- -------------
(41.2) (5.4) (18.1)
---------- ---------- -------------
TOTAL LIABILITIES (155.4) (100.4) (135.1)
---------- ---------- -------------
NET ASSETS 247.4 194.1 245.6
---------- ---------- -------------
EQUITY
Share capital 0.9 0.8 0.9
Share premium 136.0 100.9 136.0
Retained earnings 82.5 68.6 79.3
Translation reserve 28.0 23.8 29.4
---------- ---------- -------------
TOTAL EQUITY ATTRIBUTABLE TO
EQUITY HOLDERS OF THE PARENT 247.4 194.1 245.6
---------- ---------- -------------
The Interim Financial Information presented in this interim
report was approved by the Board of Directors on 6 August 2019.
SDL plc
Condensed Consolidated Statement of Changes in Equity
Share Share Retained
Capital Premium Earnings Translation Reserve Total
GBPm GBPm GBPm GBPm GBPm
At 31 December 2017
(audited) 0.8 100.7 67.8 24.5 193.8
Profit for the period - - 5.6 - 5.6
Other comprehensive income - - - (0.7) (0.7)
-------- -------- --------- ------------------- -----
Total comprehensive income - - 5.6 (0.7) 4.9
Dividend paid - - (5.1) - (5.1)
Share-based payments expense* - - 0.4 - 0.4
Share-based payments deferred tax* - - (0.1) - (0.1)
Arising on share issues* - 0.2 - - 0.2
At 30 June 2018 (unaudited) 0.8 100.9 68.6 23.8 194.1
-------- -------- --------- ------------------- -----
Profit for the period - - 9.2 - 9.2
Other comprehensive income - - - 5.6 5.6
-------- -------- --------- ------------------- -----
Total comprehensive income - - 9.2 5.6 14.8
Share-based payments expense* - - 1.5 - 1.5
Share-based payments deferred tax* - - - - -
Arising on share issues* 0.1 35.1 - - 35.2
At 31 December 2018 (audited) 0.9 136.0 79.3 29.4 245.6
-------- -------- --------- ------------------- -----
Profit for the period - - 8.0 - 8.0
Other comprehensive income - - - (1.4) (1.4)
-------- -------- --------- ------------------- -----
Total comprehensive income - - 8.0 (1.4) 6.6
Dividend paid - - (6.3) - (6.3)
Share-based payments expense* - 1.6 - 1.6
Share-based payments deferred tax * - - (0.1) - (0.1)
Arising on share issues* - - - - -
At 30 June 2019 (unaudited) 0.9 136.0 82.5 28.0 247.4
-------- -------- --------- ------------------- -----
*These amounts relate to transactions with owners of the Group
recognised directly in equity. The amounts above are attributable
to the equity of the parent company.
SDL plc
Condensed Consolidated Statement of Cash Flows
Unaudited Unaudited
6 months 6 months
to to
30 June 30 June
2019 2018
GBPm GBPm
Profit for the period 8.0 5.6
Tax expense 2.9 2.2
Profit before tax 10.9 7.8
Depreciation of property, plant and equipment 4.7 1.4
Amortisation of intangible assets 4.4 1.6
Share-based payment expense 1.6 0.4
Interest expense 1.0 -
Increase in trade and other receivables (9.4) (2.6)
(Decrease) / Increase in trade and other
payables and provisions (5.7) 5.7
Exchange differences (0.5) (1.0)
---------- ----------
CASH GENERATED FROM OPERATIONS 7.0 13.3
Cash generated from operations before
exceptional items 9.0 16.2
Cash outflows from exceptional items (2.0) (2.9)
CASH GENERATED FROM OPERATIONS 7.0 13.3
Income tax paid (3.5) (1.2)
NET CASH FLOWS GENERATED FROM OPERATING
ACTIVITIES 3.5 12.1
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of intangible assets (4.8) (3.1)
Payments to acquire property, plant and
equipment (0.5) (3.8)
NET CASH FLOWS USED IN INVESTING ACTIVITIES (5.3) (6.9)
SDL plc
Condensed Consolidated Statement of Cash Flows (continued)
Unaudited Unaudited
6 months 6 months
to to
30 June 30 June
2019 2018
GBPm GBPm
FINANCING ACTIVITIES
Net proceeds from borrowings 6.6 -
Interest paid (0.7) -
Lease liabilities paid (3.8) -
Net proceeds from issue of ordinary share
capital - 0.2
Dividend paid on ordinary shares (6.3) (5.1)
NET CASH FLOWS USED IN FINANCING ACTIVITIES (4.2) (4.9)
---------- ----------
(DECREASE) / INCREASE IN CASH AND CASH
EQUIVALENTS (6.0) 0.3
---------- ----------
MOVEMENT IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at start of
the period 19.8 22.7
(Decrease) / increase in cash and cash
equivalents (6.0) 0.3
Effect of exchange rates on cash and cash
equivalents (0.7) (0.5)
Cash and cash equivalents at end of the
period 13.1 22.5
---------- ----------
The Group has elected to present a statement of cash flows that
analyses all cash flows in total.
SDL plc
Notes to the Half year Condensed Consolidated Financial
Statements
1. Basis of preparation and accounting policies
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 2019 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 Conduct Authority, this condensed set of interim
financial statements has been prepared applying the accounting
policies and presentation that were applied in the preparation of
the Group's published consolidated financial statements for the
year ended 31 December 2018 with the exception of the adoption of
IFRS 16 - Leases. The impact of the adoption of IFRS 16 is set out
in note 10.
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 were disclosed in the
Group's annual report and financial statements for the year ended
31 December 2018 and remain broadly unchanged. SDL has an
established process both to manage risk and to 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.
IFRS 16
Details of the changes to the Group's accounting policies as a
result of the adoption of IFRS 16 are set out below as accounted
for from 1 January 2019 onwards.
Definition of a lease
Previously, the Group determined at contract inception whether
an arrangement contained a lease under IFRIC 4. The Group now
assesses whether a contract is or contains a lease based on the new
definition of a lease. Under IFRS 16, a contract is, or contains, a
lease if the contract conveys a right to control the use of an
identified asset for a period of time in exchange for
consideration.
On transition to IFRS 16, the Group elected to apply the
practical expedient to grandfather the assessment of which
transactions were leases. It applied IFRS 16 only to contracts that
were previously identified as leases. Contracts that were not
identified as lease under IAS 17 and IFRIC 4 were not reassessed.
Therefore, the definition of a lease under IFRS 16 has been applied
only to contracts entered into or changed on or after 1 January
2019.
As a lessee
The Group leases commercial office space. The Group has elected
not to recognise right of use assets and lease liabilities for some
leases of low-value. The Group recognises the lease payments
associated with these leases as an expense on a straight-line basis
over the lease term. The Group presents right of use assets that do
not meet the definition of investment property as a separate line
item on the statement of financial position.
The Group recognises a right of use asset and lease liability at
the lease commencement date.
The right of use asset is initially measured at cost, and
subsequently at cost less any accumulated depreciation and
impairment losses and adjusted for certain remeasurements of the
lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounting using the Group's incremental borrowing rate.
The lease liability is subsequently increased by the interest
cost on the lease liability and decreased by lease payments made.
It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, a change in the estimate
of the amount expected to be payable under a residual value
guarantee, or as appropriate, changes in the assessment of whether
a purchase or extension option is reasonably certain to be
exercised or a termination option is reasonably certain not to be
exercised.
The Group has applied judgement to determine the lease term for
some lease contracts that include renewal options. The assessment
of whether the Group is reasonably certain to exercise such options
impacts the lease term, which significantly affects the amount of
lease liabilities and right of use assets recognised.
The Group applied the exemption not to recognise right of use
assets and liabilities for leases with less than twelve months of
lease term.
Going Concern
The Directors have concluded that it has adequate financial
resources to continue in operation for a period of at least 12
months from the date of this report and can prepare its financial
statements on a going concern basis.
The Directors have prepared cash flow forecasts for a period of
(at least 12) months from the date of approval of these financial
statements which indicate that, taking account of reasonably
possible downsides, the Group will have sufficient funds, to meet
its liabilities as they fall due for that period.
In reaching this conclusion, the Directors have considered the
future prospects and performance of the Group, including: a review
of performance in 2019; a review of the 2019 annual plan which
includes cash flow forecasts to August 2020; a review of working
capital including the liquidity position; a review of current and
forecast financial covenant compliance and of current cash
levels.
Consequently, the Directors are confident that the Group will
have sufficient funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the
financial statements and therefore have prepared the financial
statements on a going concern basis.
2. Segment information and revenue disclosures
For internal management reporting purposes, the operating
segments are determined by product and service groupings and
referred to as divisions. The Group's operating segments are:
- Language Services
- Language Technologies
- Content Technologies
Segment profits represent the profit earned by each segment
without allocation of central administration costs which are
presented as a separate line below segment profit. This is the
measure reported to the Board (Chief Operating Decision Maker) for
the purposes of resource allocation and assessment of segment
performance. Transfer prices between segments are set on an arm's
length basis in a manner similar to transactions with third
parties.
Six months ended 30 June 2019 (unaudited)
Segment profit
before taxation,
acquisition related
External amortisation and
Revenue exceptionals
GBPm GBPm
Language Services 128.4 12.0
Language Technologies 25.6 5.2
Content Technologies 28.5 7.2
--------- ---------------------
Total 182.5 24.4
---------
Corporate costs (8.3)
Exceptional items (2.1)
Acquisition related amortisation (2.1)
Interest (1.0)
---------------------
Profit before taxation 10.9
=====================
Six months ended 30 June 2018 (unaudited)
Segment profit
before taxation,
acquisition related
External amortisation and
Revenue exceptionals
GBPm GBPm
Language Services 91.8 9.9
Language Technologies 24.0 3.7
Content Technologies 27.3 7.5
--------- ---------------------
Total 143.1 21.1
---------
Corporate costs (9.1)
Exceptional items (3.7)
Acquisition related amortisation (0.5)
---------------------
Profit before taxation 7.8
=====================
Revenue by geographical destination was as follows:
Unaudited Unaudited
6 months to 6 months to
30 June 30 June
2019 2018
GBPm GBPm
United Kingdom 20.7 18.0
Rest of Europe (excluding UK) 51.2 38.7
USA 75.7 62.0
NASA (excluding USA) 7.6 6.3
APAC 27.3 18.1
182.5 143.1
------------- -------------
Revenue by type was as follows:
Unaudited Unaudited
6 months to 6 months to
30 June 30 June
2019 2018
GBPm GBPm
Services (including professional
services) 137.5 98.6
Support and maintenance 21.0 20.1
Perpetual licences 11.2 11.8
Term licences 2.3 2.3
Software as a Service (SaaS) 9.0 9.1
Hosting services 1.5 1.2
------------- -------------
182.5 143.1
------------- -------------
3. Operating profit
Unaudited Unaudited
6 months to 6 months to
30 June 30 June
2019 2018
GBPm GBPm
Is stated after charging / (crediting):
Research and development expenditure 10.3 8.7
Provision for trade receivables (0.3) 0.6
Depreciation of owned assets 4.7 1.4
Amortisation of internally generated
intangibles 2.3 1.1
Amortisation of acquired intangible assets 2.1 0.5
Operating lease rentals for plant and
machinery 0.1 0.1
Net foreign exchange differences (0.5) (0.7)
Share based payment charge 1.6 0.4
------------- -------------
Exceptional items
Exceptional items are items of financial performance which the
Group believes should be separately identified on the face of the
income statement to assist in understanding the underlying
financial performance achieved by the Group.
The Group separately reports the cost of restructuring
programmes, acquisition and disposal costs and other exceptional
items along with their related tax effect as exceptional items:
Unaudited Unaudited
6 months to 6 months to
30 June 2019 30 June 2018
Pre-tax Tax impact Total Pre-tax Tax impact Total
GBPm GBPm GBPm GBPm GBPm GBPm
Restructuring costs 1.7 (0.4) 1.3 2.8 (0.6) 2.2
Acquisition related
costs 0.4 - 0.4 0.9 - 0.9
-------- ----------- ------ -------- ----------- ------
2.1 (0.4) 1.7 3.7 (0.6) 3.1
-------- ----------- ------ -------- ----------- ------
Restructuring costs
Restructuring costs relate to the costs of organizational change
associated with the Group's transformation programme. Normal
trading redundancy costs are charged to the income statement as
incurred.
Restructuring costs include redundancy payments in relation to
the transformation programme of GBP1.6m (1H18: GBP2.8m) and legal
fees of GBP0.1m (1H18: GBPnil).
Acquisition related costs
Acquisition related costs include integration costs of GBP0.4m
(1H18: GBPNil).
Acquisition costs of GBP0.9m in the prior year include corporate
activity-related items related to completed transaction costs and
include advisory, legal, accounting, valuation and other
professional or consulting services as well as acquisition-related
remuneration and directly attributable integration costs.
4. Taxation
Unaudited Unaudited
6 months 6 months
to to
30 June 30 June
2019 2018
GBPm GBPm
Total current taxation 2.5 1.1
---------- ----------
Deferred taxation:
Origination and reversal of timing differences 0.4 1.1
Total deferred taxation 0.4 1.1
---- ----
Tax expense 2.9 2.2
---- ----
A tax charge in respect of foreign currency translation
differences on foreign currency loans to foreign subsidiaries of
GBPNil was recognised in the statement of other comprehensive
income in 1H19 (1H18: GBP0.2m).
A tax charge in respect of share-based compensation for deferred
taxation of GBP0.1m (1H18: GBP0.1m) has been recognised in the
statement of changes in equity in the period.
5. Earnings per share
Unaudited
6 months Unaudited
to 6 months
30 June to
2019 30 June 2018
GBPm GBPm
Profit for the period attributable to
equity holders of the parent 8.0 5.6
Number Number
Basic weighted average number of shares
(million) 90.7 82.3
Employee share options and shares to
be issued (million) 1.9 1.5
---------- --------------
Diluted weighted average number of shares
(million) 92.6 83.8
---------- --------------
Unaudited
6 month Unaudited
to 6 month
30 June to 30 June
2019 2018
GBPm GBPm
Profit for the period attributable to
equity holders of the parent 8.0 5.6
Amortisation of acquisition related intangible
fixed assets 2.1 0.5
Exceptional items 2.1 3.7
Deferred tax benefit associated with
amortisation of acquisition related intangible
fixed assets (0.4) (0.1)
Tax benefit associated with exceptional
items (0.4) (0.6)
---------- ------------
Adjusted profit for the period attributable
to equity holders of the parent 11.4 9.1
---------- ------------
Adjusted earnings per share is shown as the Directors believe
that earnings before acquisition related amortisation and
exceptional items is reflective of the underlying performance of
the business.
Unaudited
Unaudited 6 month
6 month to to 30 June
30 June 2019 2018
Adjusted earnings per ordinary share - basic
(p) 12.6p 11.0p
Adjusted earnings per ordinary share - diluted
(p) 12.3p 10.8p
6. Dividend per share
Dividends paid in H1 19 were GBP6.3m (H1 18: GBP5.1m). The
dividends paid in 2019 amounted to 7.0p per share (2018: 6.2p per
share).
7. Interest-bearing loans
At 30 June 2019, the Group had a five year GBP120m syndicate
revolving credit facility, expiring on 17 July 2023. The agreement
includes a GBP50m Accordion (uncommitted) facility. At 30 June
2019, GBP12.0m was drawn on the facility (2018: GBPnil).
On drawing the funds under the GBP70m committed revolving credit
facility, the Group elects the repayment period to effect the
interest on the loan but the funds are repayable at the Group's
discretion subject to the wider terms of the facility. Accordingly,
drawdowns under this facility have been categorised as non-current.
The loan bears interest at LIBOR+ margin, the margin varying
between 1.15% and 2.15% depending on the ratio of the Group's total
net debt to its adjusted earnings before interest, tax,
depreciation and amortisation.
8. Share-based compensation grants
On 17 April 2019, 1,148,984 Long Term Incentive Plan (LTIP)
shares were awarded to certain key senior executives and employees
of the SDL Group.
9. General notes
The comparative figures for the financial year ended 31 December
2018 are not the Group's statutory accounts for that financial
year. Those accounts have been reported on by the Group'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.
10. Impact of adoption of IFRS 16 - Leases
The results for the year ending 31 December 2018 and the half
year ending 30 June 2018 have not been restated for the initial
application of IFRS 16 and as a result there is no impact on equity
or reserves.
The impact of adopting IFRS 16 at 1 January 2019 was to
recognise a right of use asset of GBP23.5m and a lease liability of
GBP23.5m. The accounting policy that the Group has elected to use
in respect of IFRS 16 is included within note 1 to the interim
financial statements.
In adopting IFRS 16 the Group has taken advantage of the
practical expedients that are applicable. These include:
- Applying a single discount rate to portfolio of leases with similar characteristics.
- The Group has also relied on its previous assessment of
whether leases are onerous or not immediately before initial
application.
- Leases with a term ending within 12 months of 1 January 2019
have been classified as short term leases and expensed through the
administrative expenses.
- Initial direct costs have been excluded from the measurement
of the right of use asset at the date of application
11. Subsequent events
The Group signed a GBP1m unsecured overdraft facility on 31 July
2019. Prior to this date no overdraft facility was in place.
Borrowings on this facility are 1.75% over base rate and is
repayable on demand.
12. Business combinations completed in prior periods
On 23 July 2018, the Group acquired the Donnelley Language
Solutions (DLS) business for cash consideration of $77.8m. As
disclosed in last year's Annual Report, the value of the
identifiable net assets of DLS had only been determined on a
provisional previously reported basis. Had the valuation been
finalised in the 2018 financial statements, these would have
differed to those previously reported. Details of the final fair
value of identifiable assets and liabilities acquired, purchase
consideration and goodwill are as follows:
Final fair
Fair value of identifiable net assets acquired value
GBPm
Property, plant and equipment 0.4
Intangible assets - customer relationships 30.1
Intangible assets - intellectual property 4.3
Trade and other receivables 15.1
Cash and cash equivalents 0.2
Trade and other payables (6.6)
Deferred tax (5.3)
-----------
38.2
Goodwill 21.2
Total consideration 59.4
-----------
Appendix - Alternative performance measures
The Board reviews a number of key performance indicators (KPIs)
to monitor and assess performance on an on-going basis.
During the period, the Board has amended its KPIs as
follows:
-- The Board has reassessed its view of the most appropriate
profit performance measure in the period. The Board have concluded
that adjusted operating profit and margin is the most appropriate
profit measure for review. Specifically, this profit measure also
excludes the impact of exceptional items and acquisition related
amortisation. Such items arise from events which are exceptional by
their incidence or size, and while they may generate substantial
income statement amounts, do not relate to ongoing operational
performance that underpins long term value generation.
The KPIs, reviewed by the Board include revenue growth, gross
margin, adjusted operating profit margin, and Free Cash Flow. Free
cash flow is defined as cash generated from operations after
interest and tax costs, maintenance capital expenditure and
capitalised research and development costs. Maintenance capital
expenditure is the recurring level of capital expenditure required
for the business in its current form to operate in medium term and
excludes non-recurring investment in capitalised system and
infrastructure costs.
Definitions of the Group's other KPIs are set out below:
-- Technology Annual Recurring Revenue (ARR): Annual recurring
revenue arising from customer contracts in force at the period end
and includes SaaS, support and maintenance, and hosting revenue
streams. Annual Recurring Revenue current and prior year amounts
are all translated at 30 June 2019 foreign exchange rates.
-- Technology Annual Recurring Contract Value (ARCV): Annual
recurring value of customer commitments arising from contracts in
force at the period end. These include term, SaaS, support and
maintenance, and hosting cash flows. Annual recurring contract
value current and prior year amounts are all translated at 30 June
2019 foreign exchange rates.
-- Language Services Repeat Revenue Rate (RRR): Current year
Language Services revenue earned from prior year customers as a
percentage of current year Language Services revenue; the
difference between RRR and total revenue is current year Language
Services revenue from new customers
-- Premium revenue: revenue from Life Sciences and Marketing Solutions;
-- Upsell and cross-sell deals: number of incremental sales of
new and existing products to existing customers
-- Linguistic utilisation: the percentage of time in-house
linguists spent on billable work across the financial period
-- The revenue basis premium revenue is calculated in line with
Generally Accepted Accounting Principles ("GAAP"). The remaining
strategic KPIs set out above have no direct reference to any GAAP
measure and hence cannot be reconciled to the Group's financial
statements. ARR and ARCV is an annualised measure of contracts at a
point in time and hence cannot be reconciled into revenue
recognised during the year.
-- Net cash: Net cash comprises cash and cash equivalents and
external borrowings. Net cash excludes lease liabilities.
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 Half year Financial Reporting as adopted
by the EU;
-- the Half year management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance 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 Guidance 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.
For and on behalf of the Board
Adolfo Hernandez
Chief Executive Officer
Xenia Walters
Chief Financial Officer
6 August 2019
INDEPENT REVIEW REPORT TO SDL PLC
Conclusion
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 2019 which comprises of the Condensed
Consolidated Income Statement, Condensed Consolidated Statement of
Comprehensive Income, Condensed Consolidated Statement of Financial
Position, Condensed Consolidated Statement of Changes in Equity,
Half year Condensed Consolidated Statement of Cash Flows and the
related explanatory notes.
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 2019 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
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. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) 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.
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 FCA.
The annual financial statements of the group are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU. The directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the
EU.
Our responsibility
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.
The purpose of our review work and to whom we owe our
responsibilities
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 DTR of the UK FCA. 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.
William Smith
for and on behalf of KPMG LLP
Chartered Accountants
Arlington Business Park
Reading
RG7 4SD
United Kingdom
6 August 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SSMFUIFUSEIA
(END) Dow Jones Newswires
August 06, 2019 02:00 ET (06:00 GMT)
Grafico Azioni Sdl (LSE:SDL)
Storico
Da Apr 2024 a Mag 2024
Grafico Azioni Sdl (LSE:SDL)
Storico
Da Mag 2023 a Mag 2024
