SDL plc ("SDL" or "the Group"), the globalization products and solutions company, is pleased to announce its results for the six months to 30 June 2001.

  Operational Highlights:

• Turnover up 45% at £ 16.75m
• EBITDA loss of £1.02m through development and integration costs of new technology
• Net cash resources of £ 11.14m
• Successful integration into the Group of the TranscendRT™ real-time
• translation and Sykes Inc. localization acquisitions
• Launch of SDLX™ 4.0 combining computer aided and real-time translation
• Launch of SDLWorkFlow™ 3.0, the first multilingual content
• management system featuring real-time translation
• New product related partnerships with ICL and Gauss
• Product sales to Organic, Royal Bank of Canada, Morgan Stanley and Belga

Commenting on the results Mark Lancaster, Chairman and Chief Executive of SDL said:

"The strong results in the face of difficult market conditions in all the key international software markets fully endorse SDL's strategy of providing cash generative localization services along with software developments. The SDL product offer has progressed substantially with the acquisition and integration of the real-time translation technology and we are delighted with the response we have had so far from existing and potential clients. Since flotation, SDL has developed in to a significantly larger and more global company, with SDL Globalware software being at the cutting edge of globalization technology. Despite the prevailing market conditions SDL is consolidating its position as the world's leading globalization software and services business".

For further information, please contact:

SDL
Mark Lancaster / Alastair Gordon
Tel: 01628 410127

ICIS
Tom Moriarty
Tel: 020 7628 1114

Chairman's Statement

SDL has performed well in the first half of 2001 with revenues of £16.75m, an increase of 45% over the corresponding period in 2000. This is despite the generally difficult trading conditions in the sector and the US economic slowdown. More importantly SDL has controlled costs, keeping the business stable with low cash burn rates, whilst continuing investment in technology and the development of software products. The Group's cash resources were £11.14m as at 30 June 2001. SDL has managed to achieve this performance by increasing revenues derived from its blue chip customer base such as Oracle, Sun Microsystems and Lexmark whilst adding new sector customers such as C R Laurence and Teleroute, both of the latter being product based solutions. The Group has added to its product and solutions offerings through both internal development and acquisitions while maintaining its pre-eminent position in the service sector of the globalization market.

Strategic Overview

Although the current economic downturn has slowed the speed of product adoption for the whole IT industry, the Group's strategy of providing both services and products has given it the stability to continue to invest its profits from the service side of the business into its long term product strategy.

As global connectivity continues to grow this will require more efficient translation from one language to another, whether this medium be the intranet, email, web or more traditional documentation. The range of SDL's product offerings now covers the complete spectrum of needs for translation from technical translation requiring quality human translation through to instant machine translation where the recipient only needs to ascertain the "gist" of the message.

This approach to providing full solutions of both product and service offerings continues to be unique in the industry. The move to a more complete solution for globally based industries is expected to become a major trend in global industry, involving a mix of both machine-related techniques and human translation. SDL believes that the combination of human translation with knowledge-based translation systems and real-time (or machine) translation with customised dictionaries gives a powerful solution to the customers' requirements.

Operational Overview

Product Development

The Group began the year with SDLWorkFlow™ and its industry-leading suite of localization tools SDLX™, HELPQA, HTMLQA and ToolProof. To this impressive array of translation memory and workflow related products SDL has now added TranscendRT™, a real-time translation engine which has been successfully integrated into our product range.

In May the Group announced the launch of SDLX™ 4.0, providing a combined computer aided translation and real-time translation solution. SDLX™ is now being adopted by new sector customers such as Air Canada and Royal Bank of Canada and has seen a significant migration of existing customers to the new product. This was followed in June by the announcement of SDLWorkFlow™ 3.0, effectively the first multilingual content management system that also features real-time translation. The pairing of real-time translation with SDLWorkFlow™'s existing translation functionality gives globally orientated companies a faster and more reliable multilingual content management solution.

Integration of Acquisitions

With the continuing consolidation in the industry, SDL is constantly appraising investment opportunities that will fit with its solutions based strategy and enhance the Group's globalization offering. This resulted in two acquisitions in the first half of 2001, the localization business and assets of Sykes Enterprises Inc for $0.6m in January and the TranscendRT™ business and technology from Transparent Language Inc for $9.0m in February.

The acquisition of the Sykes localization business has given the Group an important production presence in the USA, securing business that would not otherwise be available to the Group, and a multi-lingual capacity in Belgium. Both locations have been successfully introduced to SDL's processes and controls and are making a useful revenue contribution. It was anticipated at the time of the acquisition that there would be a cost to this integration and that they would be loss making for a 6-12 month period.

The assets acquired by the Group in the Transparent Language Inc transaction included the intellectual property rights to the TranscendRT™ machine translation technology and related products, including the Enterprise Translation Server, which provide instant language translation of e-mail, web pages and documents. The rapid integration of this technology into the Group's existing product base is documented in the product development section. The acquisition also enhanced SDL's world-wide product sales and marketing team.

Financial Overview

Results

Revenues for the 6 months ended 30 June 2001 were £16.75m, a 45% increase on the first six months of 2000. The revenue from the Group's existing business prior to acquisitions was £14.93m, an increase of 29% over the prior year, with the acquired businesses contributing £1.82m. The strength of SDL's existing client base helped it maintain growth in a period when new globalization solutions business was difficult to win. In the period to June 2001 85% of the business won was from existing clients against 65% in the prior year.

Within the £16.75m revenues in the period, £0.61m related to product solutions and the localization services generated by them. In the same period in 2000 the equivalent figure was £1.63m, but £1.15m of this was represented by one large one-off contract.

The gross margin achieved in the period amounted to 46% (2000 - 46%). Within the gross margin figures, including the prior periods, the Group has amended its accounting policy to include all direct and overhead costs relating to development expenditure below the line within overheads.

The level of development costs, including direct costs and overheads, increased to £1.49m (2000 - £0.70m) in the period as resources were applied to the continued development of SDLWorkFlow™ and the development and integration of the real-time translation acquisition. The Board anticipates that these levels of development expenditure will be maintained through the rest of the financial year and into 2002 but will constantly monitor them in the light of market conditions and product take up.

The operating loss prior to amortisation and development costs was £0.05m against a profit of £1.10m in 2000. The operating loss for the six months to 30 June 2001 was £3.04m (2000 - operating profit of £46,000). Both periods reflect the Group's policy of amortising goodwill and intangible assets over 8 years and the amortisation charge for 2001, totalling £ 1.51m (2000 - £0.34m), is increased by the effect of the acquisition of the Automated Real Time Translation Division from Transparent Language Inc. in February 2001.

The loss per share for the period was 6.50p (2000 - profit per share of 0.10p), with a diluted loss per share of 6.50p (2000 - profit per share of 0.09p). The undiluted loss per share for the period before amortisation and NIC on employee share options was 2.51p (2000 - profit per share of 1.07p).

As at 30 June 2001, the Group had shareholder funds of £33.99m (2000 - £31.06m) and net cash balances of £11.14m (2000 - £11.49m). The net cash outflow from operating activities amounted to £107,000 (2000 - net cash inflow of £204,000).

Dividend

The Directors have not recommended the payment of a dividend at this stage in the Group's development. The Group's financial resources are being retained for the future development of the business.

Board Appointment and Resignations

John Matthews, age 56, was appointed as a Non Executive Director on 15 June 2001. John has been Chairman of Crest Nicholson plc since 1996 and is also Chairman of Media Systems Group, a supplier of software, advertising and booking systems to newspaper publishers. He also acts as an independent director on the boards of three other listed companies.

Floyd Bradley resigned as a Non Executive Director on 10 May 2001 and has been appointed to the newly created position of Executive Vice President Sales and Marketing.

David Svendsen resigned as Non Executive Director on 28 March 2001.

Outlook

Trading since the half year has been in line with both expectations and the immediately preceding months. While the continuing US and European economic slowdowns affect most global markets, causing more projects to be deferred than normal, we are also seeing other companies investing in localizing their products and using e-business to reach their customers. Our technology fits well with these emerging needs for effective real-time translation workflow solutions and we are seeing more interest in real-time translation than anticipated.

Our strategy for the past 3 years has been to invest in technology and products that allow companies to go global more cost effectively and we are continuing to invest in this technology. The Board believes that this investment, although having an impact on profitability today, is necessary for us to become the market leader in the coming years.

The technology is already being adopted by both large and small companies giving them significant savings using products like SDLWorkFlow™ and SDLX™. Companies that have already adopted these systems are Morgan Stanley Dean Witter, Royal Bank of Canada and iPlanet. We are also adding to our existing partnerships with Vignette and Interwoven with similar arrangements with ICL, Gauss and Oracle.

Following our acquisition of Transparent's Real Time translation engine earlier this year, we are progressing well in enhancing this technology and integrating it with our existing technology to create the first Knowledge-Based Translation System. The Real Time translation system technology as it stands has been adopted by Lucent, EBSCO and C R Laurence and there are pilots in place with Sony and NCR and partnerships with Sybase and Lotus/IBM.

SDL is a well-funded and well-managed business. Our stable and growing service base, the rationalisation of our industry and our continued investment in technology place us in a strong position in our market place.

Mark Lancaster
15 August 2001

• The assets of Sykes Enterprises Inc. localization business for a cash consideration of US$556,000 on 22 January 2001; and
• The Automated Real Time Translation Division from Transparent Language Inc. for a total consideration of US$9 million satisfied by the payment of US$1.5m in cash and the issue of US$7.5 million in ordinary shares at 1p each. The assets acquired by the Group on 13 February 2001 included the intellectual property rights to Transparent's TranscendRT™ machine translation technology and related products, including the Enterprise Translation Server, which provide instant language translation of e-mail, web pages and documents.

10. Results for 2000

The accounts in this statement do not comprise full accounts within the meaning of section 240 of the Companies Act 1985. The figures for the year ended 31 December 2000 have been extracted from the 2000 Annual Report but do not comprise statutory accounts for that period. The audited financial statements have been delivered to the Registrar of Companies. The Auditors made an unqualified report on those accounts and their report did not contain any statement under section 237(2) or (3) of the Companies Act 1985.