18th Mar 2014 14:19
LONDON (Alliance News) - SDL PLC opted to not pay a dividend, as it swung into a pretax loss in 2013, hit by restructuring and investment costs in what it called "the toughest year SDL has ever had."
The software company on Tuesday reported a pretax loss of GBP24.4 million for 2013, swinging from a pretax profit of GBP27.4 million in the previous year, as revenue declined to GBP266.1 million from GBP269.3 million, hit by a restructuring and impairment charges during the year.
The company posted an impairment charge of GBP20.4 million relating to its Content and Analytic Technologies segment, which delivered losses of GBP5.5 million during the year.
SDL also spent GBP2.5 million on redundancies and GBP1.4 million in historic litigation costs.
SDL chose not to propose a dividend for 2013, compared to a 6.1 pence dividend in the previous year, as a result of the restructuring and investment costs made during the year. Speaking with Alliance News, Chief Executive Mark Lancaster indicated that a recommencement of dividends would come along with a return to profitability.
"We haven't really changed our dividend policy, we've given a nominal dividend in the past, it's clear we expect to return to solid profitability this year, stronger profitability the year following so there's no reason why there shouldn't be a dividend accompanying that, in line with our policy," Lancaster said.
SDL reorganised the structure of its business from a product line-focused model to a customer centric business model, SDL said, and hired several technology executives to the company during the second half of the year.
It also launched a number of systems to help manage the business more effectively, which it expects to be in full operation by the end of 2014, and it rolled out training and realignment programmes in the last quarter of 2013, which will continue into the first-half of 2014.
Revenue in the company's Language Services division declined to GBP150.5 million from GBP151.1 million in the previous year, as it saw a weaker performance in its first half, although this was partly offset by a stronger second half.
Language Technologies saw revenue drop to GBP36.2 million from GBP39.1 million in the previous year, hampered by weak licence bookings in its enterprise translation management tools.
Lancaster, who founded the company, left for a while as Financial Officer John Hunter took up the role in February 2011. However, Hunter departed in November 2012, and Lancaster returned to the position on interim basis. However, Lancaster has taken up the role on a more permanent basis. In the time that Lancaster was out of the role, he said that the company had "lost its way a bit."
"We were focused on the margin, not the future," Lancaster said.
The company said it had made hard decisions and investments during the year, but there would be a lag before the restructuring and investments take effect. SDL expressed confidence that it would return to the levels of profitability, and exceed the levels of technology growth, it had experienced in the past.
It expects the business to gain bookings, revenue and profit momentum as the new structure and initiatives come in.
"I think it will probably be a couple of years, when we see benefits it'll be in this year, I think as we move through 2015 we'll see some really solid growth. It's going to be staggered, but I am pretty comfortable that in the long term we'll return to the levels or even exceed the levels of profitability we had in the past," Lancaster said.
"Early signs are quite good, the infrastructure is in place, it will take time for our sales people to get used to selling our new platform. I think short term will be OK, long term will be very solid," Lancaster added.
The company cited changes in its marketplace, customer experience management, which it has repositioned itself to tackle.
"Essentially the whole way we buy and make decisions has changed, maybe five years ago we were spending most of our time watching TV, reading magazines. What we see now is round about 50% of our time is spent on our tablets, on our smart phones, on our laptops. We are continually connected, we are making buying decisions," Lancaster said.
"More and more we are being influenced by a very disruptive change in the marketplace, and company's that are not able to provide the right information at the right time that's easy to understand and see on a plethora of devices are going to suffer."
"The only way you can manage this is through technology," Lancaster explained. "This is why the likes of Adobe, IBM, Oracle, Sales Force have invested in similar technology to our own. It's going to evolve pretty quickly, businesses themselves are going to have to go through restructuring so they can provide a solid customer experience."
SDL is aware that competition is intensifying in this market, and whilst it is confident about its position in terms of its offering, said it's go-to-market is an area of focus.
"Where we've suffered in the past is we haven't got our brand out there and had our go-to-market in as coherent a way as possible, It's our go-to-market we need to improve," Lancaster added.
The company has primarily focused on restructuring and investment to refocus its business, and doesn't anticipate that it will switch that focus to cost-cutting measures, although it doesn't rule them out.
"We've done a lot of right sizing; although we've restructured we've made some savings in research and development as well as in the restructuring. I don't think we'll be making any more significant cost cutting measures," Lancaster said.
"However, constant vigilance on costs," Financial Officer Dominic Lavelle added. "We're always looking at the costs."
Shares in SDL were trading down 5.9% at 349.00 pence Tuesday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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