SDL plc ("SDL International" or "the Group"), the globalization products and solutions company, is pleased to announce its unaudited preliminary results for the twelve months to 31st December 2000.

 
Highlights:

• Turnover up 129% to £29.73m (1999: £12.96m) with organic growth of 69%.
• Pre-tax profits before interest, depreciation and goodwill amortization (EBITDA) of £2.89m (1999: £0.27m).
• Pre-tax profits of £1.06m, with earnings per share of 1.00p per share (1999: loss of 1.78p per share).
• Sales of SDLWebFlowtm and SDLXtm ahead of expectations with the contribution of product related sales reaching £2.1m (1999: nil).
• Gross margins increased to 47% (1999: 44%).
• Since flotation in December 1999, SDL International has launched SDLWebFlowtm ahead of schedule in February 2000, raised over £21m in a Rights Issue for additional working capital and the acquisition of SDL Global Solutions (Ireland) Limited (formerly ITP).
• SDL International also acquired Translation Craft Limited, SDL Technology Centre Limited (formerly Aslan) and ATR Information AB during the year.
• Since the year-end, SDL International has acquired machine translation technology (TranscendRTtm), a real time enterprise translation application for approximately £6.2m and the localization business of Sykes Technologies Inc. for £0.38m.
• Grown the business from 287 employees in 13 offices at the end of 1999 to 746 employees in 24 offices worldwide.
• All core businesses performing in line with the Board's expectations with investment in the marketing, sales and continuing development of SDLWebFlowtm anticipated to increase considerably during the course of the current financial year.
• Net funds at year-end were £13.07m ( 1999: £7.36m).

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

"SDL International has enjoyed the benefits of maintaining its strategy of focusing on leading edge technology and services within the localization and globalization markets. Having achieved rapid critical mass through organic and acquisition-led growth since flotation, and maintaining strict controls on costs and marketing in difficult market conditions, SDL International has become the leading specialist in its chosen markets.

"The Company has successfully achieved solid software and product related sales. We continue to believe that computer-aided translation technology combined with that of real-time machine translation technology and human translation is essential for globally trading companies. We believe global multi-lingual transactions and communication will only increase, and a commercial solution for this fast growing market is needed."



Mark Lancaster
Tel: 01628 410127
Chairman & Chief Executive

Nikki Pollard
Tel: 01628 410100

Bobby Morse/Louise Bolton
Tel: 020 7466 5000

Buchanan Communications
bobbym@buchanan.uk.com


SDL International enjoyed another strong year of organic and acquisition-led growth in 2000 following the Company's highly successful flotation on the London Stock Exchange in December 1999. Following the flotation, and the Rights Issue in March 2000, SDL International acquired and integrated four new companies and launched a further four new software products. The Preliminary Results, which show organic growth of 69% and total sales growth of 129%, demonstrate the success of SDL International's strategy of focusing on software and services which enable businesses to maximize their ability to increase sales and services in the international market place. In addition, the performance of the Company culminated in SDL International being included in the FTSE All Share and Small Cap indices with effect from 18 December 2000.

Following the acquisitions made in 2000 and the two technology acquisitions since the financial year end, SDL International can now offer a comprehensive globalization solution not only to some of the world's largest companies, but also to smaller and medium sized businesses. Growth will continue through increasing this product and service offer and increasing SDL International's reach through its 24 offices and 746 staff worldwide.

SDL International's strategy is unchanged as we continue to further consolidate the Group's position of being the pre-eminent provider of globalization solutions in the market place. In line with increasing our gross margins, despite the considerable investment in technology and services, SDL International has delivered ahead of schedule upgrades of software and multi-lingual content management products: namely SDLXtm, SDLWebFlowtm, HelpQA, HTMLQA and Toolproof. Product sales, though at an early stage of development, have been very encouraging with growth being further supported by strong cash flows generated by our solutions services, which continue to grow at a compound rate of over 50%.

Financial performance

The Group's turnover increased from £12.96 million to £29.73 million, an increase of 129%. Acquisitions contributed £7.80m with organic growth from the existing businesses contributing £21.93m, an increase of 69%. The organic growth was created from the wider industry recognition created by the establishment of SDL International's complete product and service solutions. Product related sales contributed £2.14 million (1999 - nil), which was better than expected.

Gross margins increased from 44% to 47%, a solid performance which includes the expensing of £1.61m relating to software and systems development costs. These costs included the launching of new versions of SDLXtm (the computer aided translation memory product) and the first release of SDLWebFlowtm (the multilingual content management system) following its successful launch in February 2000. Earnings before interest, depreciation and amortisation (EBITDA) were £2.89 million (1999 – £0.27 million). The operating profit was £0.51m (1999 - loss of £0.56m) and the profit before tax was £1.06 million (1999 - loss £0.55 million).

Earnings per share for 2000 were 1.00p (1999 – loss per share 1.78p) and the Company completed the year with net cash resources of £13.07 million (1999 - £7.36 million) as a result of positive cash flows from continuing operations. The balance includes cash raised at the time of the Rights Issue and lower than expected provisions for the integration and restructuring of SDL Global Solutions.

Acquisitions

The major acquisition was the £14.25 million purchase of SDL Global Solutions (Ireland) Limited in May. This has brought an additional production capacity with its current headcount of almost 180 based in a number of locations including Ireland, Spain, Italy, Hungary and complementary locations to SDL International's own offices in China and Japan. The addition of Italy and Spain has strengthened our in-country resource base in Europe while the Japanese office is a full production unit with an important local customer base.

SDL Global Solutions has been successfully integrated into the SDL Group including the adoption of SDL International's processes and business model. The increase in scale has improved the potential client base of the Group and allowed us to approach large global businesses that require significant resources and a guarantee of the quality of service necessary. The integration of the two businesses where there were overlaps was achieved with relatively little additional cost and an attrition rate of major customers which was considerably less than anticipated.

In addition to SDL Global Solutions , the Group also acquired SDL Technology Centre Limited and ATR Information AB. The former has given the Group a core testing and evaluation facility serving both the Group and third party customers and is now being managed along with the Hungarian operations acquired with SDL Global Solutions (Ireland) as a joint engineering resource. ATR has developed well as the Group's Nordic hub and is building its customer and supplier base in the other Nordic countries beyond Sweden. SDL International also acquired the intellectual property rights for the online quality assurance products HTMLQA and HelpQA from Translation Craft and Toolproof.

After the year end SDL International acquired the localization business of Sykes Technologies, Inc. for US$0.56m (£0.38m). Sykes has three locations based in Belgium, Edinburgh and Boulder, Colorado. This latter location has provided SDL International with a production and service capability within the USA for the first time, an essential component in our infrastructure for handling more efficiently existing and potential customer requirements in the key North American markets. Boulder is already working with the US sales force and the operational divisions in the UK and Ireland to enhance our competitive edge for potential new mandates.

On 15 February 2001 SDL International completed the acquisition of the Transcend Machine Translation technology from Transparent Language, Inc. for a total consideration of $9m (£6.2 million), satisfied by $1.5million in cash and through the issue of $7.5 million in Ordinary shares. The assets being acquired include the intellectual property rights to the technology and related products, including the Enterprise Translation Server, which provides instant translation of e-mail, web pages and documents.

Products

SDLWebFlowtm was launched in February 2000, slightly ahead of schedule. As many of the 'dot coms' have failed to live up to expectations early on in the year, larger multinational corporations have further established their web strategies. As a consequence, SDL International has successfully sold product to companies such as Dun & Bradstreet, Saba, and Morgan Stanley Dean Witter. This has been the result of creating strong partnerships with a range of partners from content management specialists such as Vignette, system integrators such as Accenture and interactive developers such as Organic. We also deploy a direct sales force that accounts for approximately 30% of new revenues.

Since the launch of SDLWebFlowtm significant enhancements have been added, including the development of a generic API (Applications Programme Interface) that gives us the ability to interface with a wide variety of platforms and content management systems, and Version 3 is due for release in August 2001. The continued development of SDLWebFlowtm has been enhanced and accelerated by the integration of complementary technology and work flow systems obtained by SDL International as a result of the acquisitions during the year. This combination of in-house development and acquired knowledge will continue to be a major element of the development of our globalization solutions strategy.

At the same time, the continued enhancement of the technology and features of SDLXtm and a higher profile in the localization industry has significantly increased the unit sales volumes of SDLXtm, both to individual translators and translation publishers. SDLXtm is now being recognized as one of the industry leaders in translation memory products and has seen a significant sales increase in the last 6 months to 31 January 2001.

To compliment the SDLXtm translation memory product offering to the localization industry the acquisitions of Translation Craft Limited and Toolproof have broadened the functionality of the memory translation suite that the Group now offers. The products and technology acquired are recognized as being industry leaders in providing quality and engineering assurance testing.

The SDL International range of product solutions has now been further built on by the acquisition on 15 February 2001 of the TranscendRTtm Machine Translation technology and related Enterprise Translation Server software product (ETS) from Transparent Language, Inc. The Directors consider this acquisition is critical in finalizing SDL International's strategy of providing significant advancements to real time automated translation and workflow integration. The combination of SDL International's expertise in computer-aided translation, with the proven high performance of ETS, will provide a powerful commercial solution in the field of automating translation. This combination will enable SDL International to offer a complete solution for companies to manage their multi-lingual web-site content as well as other functions such as e-mail and internal intranet sites.

Services

The services element of the globalization solutions offered by the Group has benefited on two fronts during the year – the association with the sales of SDLWebFlowtm and the acquisition of a number of additional locations. The introduction of clients to SDLWebFlowtm usually brings with it the localization project of the original web site and the ongoing updates, providing further incremental revenues.

Following the acquisition of SDL Global Solutions and the Sykes assets, SDL International has considerably strengthened its service infrastructure. The cashflow generation of this business remains an integral part of SDL International's overall business at this stage and provides a solid platform to further develop the Products Division which will continue to absorb considerable investments as it develops into the principal revenue dynamic of SDL's overall business.

Board Appointment

Keith Mills was appointed as Technical Director from 1 September 2000. Keith joined SDL International in 1994 and previously held senior positions with Lotus Corporation, where he specialized in the process of software localization before moving to Ashton Tate to the international software-engineering group.

Strategy and Prospects

SDL International has been at the forefront in the development of product based solutions for assisting companies to reach a global audience. Significant investment was made in earlier years and through 2000 to develop software products for the future global needs of international companies. The combination of these products and services enables clients to rapidly translate and maintain multilingual content of their products, a key evolving requirement for multinational companies to be successful in global markets. This ability of the SDL solution has been built on by both the internal resources and the acquisitions during 2000 and since the year-end.

The start of the new Millennium has only served to emphasize that Globalization is an even larger issue than when SDL International floated on the London Stock Exchange in December 1999. A large proportion of corporations are having to re-evaluate their whole approach to reaching and competing in the global market place and the Internet continues to break down the barriers to entry for these organizations with international aspirations. Language has to become less and less of a barrier for this to be accomplished and this in turn leads to the need for improved globalization solutions, both in terms of quality and speed.

The above evolution has been the cornerstone of the development of SDL International's strategy to be a major force in the globalization industry. This has been the rationale behind the development of enhancing the automated solutions and the directors believe that the most recent acquisition of TransendRTtm real time translation engine combined with SDL's computer aided translation memory and workflow solutions will provide a significant step forward in the field of real time automated translation. Significant resources will be invested in the above technology to provide a cost-effective solution to allow companies to go global quickly and cost effectively.

The Board anticipates that 2001 will be another year of strong revenue growth, in line with the benefits of a full year's contribution from the acquisitions and the further establishment of SDLWebFlowtm as the leading multi-lingual content management system. The Group anticipates a steady improvement in gross margins as the higher margin software and product related sales increase over time. Though the concept of globalization remains in its early stages, SDL International continues to benefit from significant demand for its services and products from well established technology and blue chip customers. However, in order to best address a more educated and broader market globally, and to maintain and improve upon the significant leading edge of SDL International's technology, the Board intends to increase the investment in and marketing and sales of SDLWebFlowtm. This solution will be further enhanced with the increased leverage that the integration of computer aided translation and machine translation will bring. The solutions sales force in Europe, Asia and the USA has been considerably expanded during the last six months in anticipation of this acceleration of product marketing. SDL intends to allocate additional resources for further development and integration required for the most recent acquisitions, increasing the global sales and marketing infrastructure, and the development of software solutions.

Management, Employees and shareholders

I would like to take this opportunity to welcome our new staff into the Company and thank the management and employees for all their continuing effort and dedication in assisting your Board to enhance and strengthen the Group over the past year. This has enabled the Company to continue its strategy to become the pre-eminent provider of globalization solutions.

Mark Lancaster

Chairman