Final Results

12 March 2013

SDL PLC

Preliminary results for the year ended 31 December 2012

SDL today reports a year of solid organic revenue growth overall for the Group, and good progress on the integration of the Alterian acquisition

SDL plc ("SDL" or "the Group"), the leading provider of Global Information Management (GIM) solutions, announces its audited preliminary results for the year ended 31 December 2012.

Operational highlights

·; Headline revenue growth of 17.6% driven by underlying organic growth and strong Alterian contribution.

·; Performance across the three segments at constant currency:

o Language Services revenue grew by 12.4%, driven by strong sales and marketing execution.

o Content Management Technologies revenue declined marginally.

o Language Technologies revenue business was flat.

·; Geographically, headline growth in Asia was particularly strong at 46%, North America was 12%, with Europe (including the UK) increasing by 17%.

·; Significant new client wins during the year included Barnes & Noble, Husqvarna, KONE, Majestic Wines and Purina.

·; Net cash of £6.3 million following the £70 million acquisition of Alterian in January 2012.

·; In addition to the sales and marketing investment announced in November 2012 a further £4 million to £5 million of sales and marketing and R&D will be invested in 2013 to create a more robust platform for future growth.

·; Final dividend of 6.1 pence per ordinary share, a 5.2% increase over the dividend paid in the previous year reflecting our confidence in the outlook.

Commenting on these results, Mark Lancaster, Executive Chairman and Chief Executive Officer said today:

"Although the underlying organic growth for the group was strong, 2012 was a difficult year for SDL. As a result of under investment in the business in 2011 and 2012 performance has been impacted, particularly in the technology segment. Despite this we remain confident in our outlook for sales in 2013 and, as announced in November 2012, we will make significant discretionary sales, marketing and R&D investments in 2013 to return SDL to strong technology growth. The quantum of the total investment will be £8 million to £9 million. This will enhance technology revenue growth in 2013 but will reduce profits for 2013. These investments will take SDL to a new level, creating a solid platform to deliver significant sustained revenue growth and profitability to 2014 and beyond."

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About SDL

SDL enables global businesses to enrich their customers' experience through the entire customer journey. SDL's technology and services help brands to predict what their customers want and engage with them across multiple languages, cultures, channels and devices. SDL has over 1,500 enterprise customers, 400 partners and a global infrastructure of 70 offices in 38 countries. 42 out of the top 50 brands work with SDL. For more information, visit www.sdl.com.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S STATEMENT

Dear Shareholder

Summary performance

SDL today reports another year of solid organic revenue growth for the Group, and good progress on the integration of the Alterian acquisition. As a result of under investment in sales, marketing and infrastructure in 2011 and 2012, SDL's performance in the technology segment was disappointing (as announced in November 2012). Nevertheless revenue for the year was £269.3 million (2011: £229.0 million). Profit before taxation and amortisation of intangible assets ("PBTA") was £35.5 million (2011: £39.7 million). Gross cash in the business at the year end was £28.5 million whilst net cash amounted to £6.3 million (2011: £70.4 million), following the £70 million acquisition of Alterian in January 2012.

Headline revenue growth of 17.6% can be attributed to underlying organic growth of 6.7%, 12.4% growth from acquisitions and a 1.5% decrease arising from foreign exchange effects. Geographically, growth in Asia was 46%, North America was 12%, with Europe (including the UK) increasing by 17%. The cash generated from operations for the Group was £25.8 million, including one-off outflows and working capital movements of £5.7 million relating to the acquisition of Alterian that was completed in the first half of 2012. Operating cash flows returned to SDL's normal, strong levels with PBTA conversion of 125% in the second half, or £18.8 million in absolute terms (excluding capital expenditure).

Segmentally, we were pleased with our Language Services organic revenue growth of 12.4% due primarily to operational, sales and marketing execution. Services PBTA contribution was £23.2 million, down from last year due to investment in growth and some large US contracts with lower margins. Excluding acquisitions, we were disappointed with our technology revenues that declined 1.6% organically and contributed £10.7 million to Group PBTA in the year. This was primarily due to inadequate investment and execution into sales and marketing in 2011 and 2012 coupled with difficult economic conditions, nevertheless technology bookings and revenue increased significantly in the last quarter.

Alterian Acquisition

The Alterian acquisition has outperformed initial expectations with a revenue and PBTA of £28.4 million and £2.3 million respectively. This outperformance is attributable to a combination of high levels of customer renewals, integration savings, and strong new business sales of our marketing analytics suite. Investment into research and development was significantly increased in 2012 and will continue through 2013. A swift operational integration of Alterian delivered stability to Alterian's clients, partners and staff. Whilst Alterian's Web Content business integrated into SDL's Content Management Technologies segment, Alterian's Campaign Management, Analytics and Social Intelligence businesses have been combined in a new reporting segment. We are very pleased with the cultural fit of Alterian staff, who have integrated well into the combined organisation.

Market Opportunity

We offer our customers a compelling solution to meet the present and future challenges of customer engagement. This is known by our industry as Customer Experience Management or Digital Experience Marketing. Essentially SDL believes that for companies to succeed and prosper in this digital world they need to have an integrated technology stack that allows them to engage with their customers. It has been, for the past ten years, our vision to provide integrated technology solutions and services to meet this challenge. We have methodically invested both organically and by acquisition to create an integrated technology stack to deliver the fundamentals a business needs to enhance revenue growth and manage customer engagement. The key components required to engage effectively with customers are:

- Analytics and Social Intelligence - to listen to what customers are saying and doing.

- Web Content Management - to create and manage content that customers consume.

- Structured Content Management - to deliver information online about products they use.

All this content needs to be available on multiple devices - mobile phones, laptops, tablets and personal computers in the right format for that device. It needs to be the right format and in the right media and customers need to be targeted with the right information. Hence we have also invested in Targeting technology, Media Management and Mobile technology. Most importantly a company's sales universe is the world. The world communicates in multiple languages, SDL's heritage is language, we are the only company that can truly deliver Global Customer Experience Management solutions.

We are delighted to have expanded our business, entering strategic new relationships with global enterprises including Nordea Bank, Migros, Abercrombie & Fitch and Estée Lauder, and growing our account presence at Bose Corporation, Ford Motor Company and Toys R Us Inc with multiple solution cross-sales. The combination of SDL's leading technology, an outstanding customer base and improving distribution capabilities means we are confident of our future success.

Vision and Strategy

With the acquisition and successful integration of Alterian's leading Marketing, Analytics and Social Intelligence software into SDL's Global Information Management technology stack, the Group continues to realize its vision and strategy as a leading player in Customer Experience Management.

Investment in the future remains a key feature of the business. In November 2012, SDL announced that it would be increasing its expenditure on sales and marketing by approximately £3 million to £4 million. Following further analysis of the market we have concluded it is important to invest a further £4 million to £5 million into infrastructure and research and development to take full advantage of the market opportunity. The total amount that will be expensed in 2013 for these investments will be around £8 million to £9 million. These investments will be in:

- Creating an SDL Consulting division focused on selling integrated Customer Experience Solutions.

- Enhanced structure in our Language Technologies division to launch our new Software as a Service platform, Language Gateway, and enhance our Machine Translation sales.

- Sales and marketing infrastructure in our Content Management division.

- Sales and marketing infrastructure and research and development into our Business Analytics and Social Intelligence divisions.

- Internal and external Group Marketing and infrastructure across the business.

We believe it is necessary to make the above investments to fully realise the potential of our technology stack and services offerings. SDL is considered by both Forester and Gartner to be a leader and innovator in our field with our Global Information Management technology stack.

Dividend

The board remains confident in the operational cash generation of the business and is recommending a final dividend to the Annual General Meeting of 6.1 pence per ordinary share, a 5.2% increase over the dividend paid in the preceding year.

Management change

As previously announced in November 2012, Mark Lancaster, Executive Chairman, stepped into the role of Chief Executive Officer following John Hunter's decision to leave SDL to pursue other interests.

Outlook

Although the macro economic situation in Europe remains challenging, demand in key northern European economies is expected to remain stable in 2013. Slow recovery in North America is expected to continue at the macro-economic level, and the prospects in developing and emerging markets in Asia and South America are strong.

We remain confident in our outlook for sales in 2013 and we will make significant discretionary marketing, sales and R&D investments of £8 million to £9 million in 2013 to return SDL to strong technology growth. This will enhance technology revenue growth in 2013 but will reduce profits for 2013, particularly in the first half of the financial year. These investments will take SDL to a new level, creating a solid platform to deliver significant sustained revenue growth and profitability to 2014 and beyond.

SDL remains well positioned for growth and stability selling into multiple geographies and across a variety of sectors. SDL has increased its presence in Asia and North America in 2013, partly due to the addition of Alterian and partly due to organic investment.

We enter 2013 with a compelling set of products and solutions and a great vision that has proven delivery over the years. Our pipeline is strong and gives us confidence through 2013 and beyond. The Board remains confident in the Group's strategy and execution capability. The balance sheet is strong, enabling both organic and acquisition growth opportunities to be pursued as they are identified.

As we look forward, the Board is confident in the Group's growth prospects and long term potential to deliver future profitable growth and shareholder returns.

OPERATING & FINANCIAL REVIEW

Performance overview

2012 was a year of significant strategic progress for SDL with the acquisition of Alterian, a transaction which brought integrated marketing capabilities to complement SDL's Customer Experience Management proposition. A steady operating performance was maintained by the swift and effective integration of Alterian, which delivered stability to Alterian's clients, partners and staff. The Alterian Campaign Management & Analytics and Social Intelligence businesses have been combined in a new reporting segment, with the former Alterian Web Content business now being accounted for within SDL's Content Management Technologies segment.

SDL's business is made up of a combination of

§ Software as a Service licences, primarily from our Analytics, Social Media and Language technology platform.

§ Perpetual software licences, primarily from enterprise web content management, enterprise translation management and desktop translation productivity software sales.

§ Support and Maintenance from the enterprise products.

§ Language and consulting services.

Software as a Service licence bookings across the business increased by 6%, making up 45% of total licence bookings.

Perpetual Software licence bookings for the business decreased by 12%.

Our recurring software revenues comprising Software as a Service and Support & Maintenance revenue streams account for 51% of technology revenues.

Services revenue increased organically by 12.4% in 2012; 89% of services revenue in 2012 was from recurring customers (2011: 92%). The reduction in the year reflects a high level of new customer acquisition, with the underlying rate of recurring business broadly unchanged.

We increased our Research and Development investment (none of which is capitalised) by 48% in 2012 to £21.8 million (2011: £14.8m), which included a 33% increase relating to the acquired Alterian business.

The best performing segment in 2012 was Language Services, which grew at 12.4% at constant currency, offsetting weaker performance in Technology which declined 1.6% organically.

Asia was the strongest revenue growth region in 2012. Demand in North America was strong in Language Services but offset by weaker technology performance. Asia, where we continue to diversify the customer base in both Technology and Services, has recovered strongly from a flatter performance in 2011 with some important new wins. Organic growth in continental Europe shows a small increase where the demand environment is less strong. The Alterian acquisition increases our footprint in North America and Asia and already we see strong demand in line with our existing regional pattern. We continue to expand our global infrastructure, having invested in additional facilities in Asia and the Americas to match growing demand in these regions.

These factors saw headline revenue growth of 17.6% to £269.3 million, driven by underlying organic growth at constant currency of 6.7%, 12.4% growth from acquisitions and a 1.5% decrease from currency effects.

With the acquisition of Alterian, Technology revenue, as a percentage of total Group revenue, has increased from 41% in 2011 to 44% in 2012. We see the market opportunity in Technology as greater than ever with Alterian supplementing our core technologies and giving us and our clients the potential to seamlessly integrate Customer Experience Management solutions. We are fully committed to maintaining appropriate levels of investment to fully exploit these opportunities whilst continuing to deliver profitable growth.

Overall, Group operating margin before amortisation was reduced at 13.2% (2011: 17.3%), reflecting continued investment in innovation, one-off administrative expenses associated with the Alterian acquisition and a more cautious view of percentage-of-completion and cost-to-complete of certain services contracts in the second half of the financial year.

Excluding acquisition related one-off costs and Language Weaver, which has continued to attract strategic investment in 2012, group operating margin was 14.9% (2011: 18.9%). Excluding Alterian and Language Weaver, Group operating margin was 15.7% (2011: 18.9%).

Cash flows from operating activities (after income tax paid) were £17.5 million (2011: £32.6 million). Organic DSO was stable and DSO for the acquired Alterian business has improved since acquisition. Profit to cash conversion decreased, due to the expected reduction in acquired Alterian creditors as overdue trade balances were settled, deal transaction costs paid and deferred income associated with old non-renewing customer contracts was not replaced. Profit to cash conversion in the underlying business excluding the non-recurring effects of the Alterian acquisition remains strong. Cash flow from operations in the second half was £18.8 million or a 125% conversion on PBTA. At the end of 2012 we had net cash of £6.3 million on the balance sheet (2011: £70.4 million), comprising positive cash balances of £28.5 million (2011: £70.4 million) and drawn credit facilities of £22.2 million (2011: £nil).

In SDL's trading statement of 26 November 2012, the Group disclosed that it was taking a more cautious view of percentage-of-completion and cost-to-complete of certain services contracts in the second half of the financial year. Certain units of the business were reviewed independently of operational management. The adequacy and effectiveness of the internal control systems were scrutinised. The findings were reported to the Board and the Audit Committee. Following the review, certain financial reporting lines have been changed and controls implemented to reinforce and validate the existing process. These include staff training, monitoring, measuring and reporting against the existing framework of formal documented policies.

Strategic Performance Indicators

Innovation

Innovation remains core to the SDL business. To ensure the delivery of our technology vision for the future, investment in research and development was maintained at £21.8 million or 18% of combined Technology segment revenues. At the same time we continue to carefully manage our cost base to deliver profitable technologies and services. Five significant new products were released in 2012:

§ SDL Campaign Manager and SDL Customer Analytics. This latest version enables our customers to manage and execute personalised cross channel communication to individually targeted customer groups within a campaign audience of up to 100 million.

§ SDL SM2. This new version of SDL's Social Media business intelligence platform includes new reporting and sentiment analysis functionality. SM2 is also the first fully featured enterprise-class social media platform to provide convenient online provisioning for small-midsize businesses.

§ SDL Fredhopper. This new version addresses arguably the biggest challenge associated with global eCommerce - presenting the right products to each individual customer based on what they want, while also complementing the retailer's local merchandising strategy.

§ SDL Studio Groupshare.This collaboration hub for small and medium size localisation teams using SDL Trados Studio and SDL Multiterm enables groups to work via a single platform sharing translation memories and terminology, and has been named the winner of a Silver People's Choice Stevie® Award for favourite new products.

§ SDL Live Content. This is a new family of software products, comprising editing, storage and delivery tools that enable companies to meet all their customers' technical information needs through all the relevant touch points in the customer journey.

In addition to the main product releases, SDL continues to deliver updates on existing product lines and closer integrations between the different SDL solutions.

Revenue

Headline revenue growth of 17.6% was driven by underlying organic growth at constant currency of 6.7%, acquisition effects of 12.4% and currency translation effects of -1.5%.

Headline revenue growth was strongest in North America and Asia. Continental Europe was up 8% (4% organically) where continued economic uncertainty in Eurozone countries is affecting economic sentiment in the region. The Language Services segment saw strongest growth, where a 12.4% underlying increase at constant currency was achieved, a testament to the continued value our clients derive from these solutions. A diverse mix of regions, industry verticals and customers provided some degree of buffering for the group from the declining performance of Technology as a whole and weaker European performance. Group revenues by reporting segment are shown in table 1 and a geographic split by destination is shown in table 2.

Analysis of revenue by segment (Table 1)

Geographic Split of Sales by Destination (Table 2)

With new business wins, the customer concentration profile continues to improve with the 20 largest customers contributing 27% (2011: 29%) of revenue in 2012. It remains that no single customer contributes more than 5% of Group revenues.

We continue to expand our presence by vertical market sector. In 2012, there were 10 sectors contributing more than £10 million of revenue (2011: 8), including Information Technology, Consumer Electronics, Healthcare, Pharmaceuticals, Financial Services, Communications, Entertainment & Leisure, Construction & Machinery and Automotive.

Performance by Segment

For management purposes the Group is organised into business units based on products and services, and has four reportable segments.

Content Management Technologies (contributing £57.8 million or 21% of revenue to the group and £10.4 million or 29% of Group PBTA) (2011: contributing £52.7 million or 23% of revenue to the group and £8.8 million or 22% of group PBTA).

This segment comprises Web Content Management Solutions, eCommerce Technologies and Structured Content Technologies. Whilst total segment revenues grew by 9.6%, the acquisition of Alterian's web content business contributed a 13.4% increase, with an underlying organic decline of 2.7% and a 1.1% negative foreign exchange effect.

Flat performance in Web Content and reduced licence revenue in Structured Content was partially offset by strong growth in the eCommerce business, where sales order bookings for new SaaS licences increased by 41% in the year. At a headline level, the former Alterian Web business contributed good levels of support and maintenance and professional services revenues, having proved more resilient than expected when the acquisition was made in January 2012. The segment PBTA margin was 18.0% (2011: 16.7%).

Strategically, we continue to make good progress in Web Content, with Gartner naming SDL Tridion for the fifth consecutive time in the Leadership Quadrant for Web Content Management. In particular the usability and interoperability of SDL Tridion was cited, which we are particularly proud of, having launched a new user interface in the year and enhanced the integration of Tridion with other SDL products. We also launched our Global Multinational Alliance Programme (GMAP), which brings together a community of system integrators, strategic consultancies, creative agencies and technology alliances to jointly participate in certification, training and the sharing of best practices. Growth in Asia was a highlight, where organic revenue increased by 62%. Renewal rates in the installed base were also very strong at 95%.

In Structured Content, the strategic focus in 2012 has been the full launch of SDL LiveContent, a new family of software products that transforms how end users' technical information needs are met by harnessing the power of XML. Replacing traditional ad hoc tools and processes, SDL LiveContent is an integrated end-to-end solution that delivers better quality content, faster time to delivery and improved searches. The solution comprises components for the simple creation of advanced content, storage that enables reuse, sharing and delivery to any channel and interactive output that enables a unique combination of collaboration and feedback with users of content.

We are also pleased that SDL has been awarded two distinctions from KM World for its best of breed content management technologies, "100 companies that matter in knowledge management" and induction into the KM World 2012 Hall of Distinction. The KM World Hall of Distinction is a first time award for SDL and is given to companies that offer innovative technologies and contribute to outstanding thought leadership in knowledge management.

New clients in 2012 include KLM Royal Dutch Airlines, US Government Printing Office, AGCO and Acme Packet.

Language Technologies (contributing £39.2 million or 15% of revenue to the group and £2.5 million or 7% of Group PBTA) (2011: contributing £40.1 million or 18% of revenue to the group and £5.2 million or 13% of group PBTA).

This segment comprises Desktop translation technologies, Enterprise translation solutions and Machine Translation. Total segment revenue saw a small decline, with a headline reduction of 1.7% due to foreign exchange effects, with a negligible decline in the underlying business at constant currency. The business continued its significant investment in cloud machine translation technologies in 2012, to accelerate development and advance SDL's leadership in this strategic space. Whilst gross margins grew to 84% (2011: 82%), additional investment together with selective territory expansion in growth markets resulted in a reduced PBTA margin for the year of 6.3%, down 6.8%. SDL remains committed to leading the industry in enterprise statistical machine translation and we plan to sustain continued high levels of investment in research and development, sales and marketing and capital expenditure into 2013.

Sales increased in all product areas with the exception of the US Government, where weakness in the first half continued through the remainder of 2012, due to continued uncertainty around the US Federal budget. Software as a Service ("SaaS") sales continued to increase as a proportion of total licence sales, a positive trend that improves the revenue visibility of the business going forward.

In January 2012 we launched a new integration between the SDL Trados Studio desktop translation product and the SDL BeGlobal cloud platform for machine translation. This has enabled 23,000 translators to leverage secure cloud based automated translations, increasing their productivity and opening up new opportunities for post-editing business.

We are proud to have won a People's Choice Stevie® Award for SDL Studio Groupshare. This collaboration hub enables localisation teams using SDL Trados Studio and SDL Multiterm to work across a single platform, resulting in faster delivery with increased quality and control. The Society for New Communications Research Excellence (SNCR) has also honoured SDL with a Commendation of Merit for SDL BeGlobal, acknowledging the key role SDL's leading machine translation technology plays in the Language industry space.

During the year we embarked on a programme to rationalise Language Technologies research and development locations to two core centres of excellence in the US and Europe. This ensures future scalability by creating larger teams with improved access to critical talent. We are also pleased to have expanded our academic collaboration with a new machine translation research facility, working with the Department of Engineering at the University of Cambridge.

New clients in 2012 include Associated Press, ADP, Danish Oil and Natural Gas and KONE. We are particularly pleased that SDL Studio was selected by the European Union in December 2012, for a 5 year translation productivity tooling contract.

Language Services (contributing £151.0 million or 56% of revenue to the group and £23.2 million or 65% of Group PBTA) (2011: contributing £136.2 million or 59% of revenue to the group and £25.5 million or 65% of group PBTA).

2012 was another year of very strong headline revenue growth of 10.8% for the segment, comprising 12.4% underlying growth at constant currency and 1.6% loss on foreign exchange. This was driven by strong performance in the United States where revenue grew by 15%, and Asia where revenue grew by 28%. 40 new accounts were added in Asia during the period, which are expected to contribute to further growth in the region in 2013.

We have further invested in our global infrastructure in the Americas, Asia and our low cost sourcing hubs to meet growing demand. We also continue to grow our business in the Nordic region and Latin America, realising the benefits of investments made last year.

The segment PBTA margin declined to 15.4%, a decrease of 3.4%, which reflects scaling investments, a more cautious view of percentage-of-completion and cost-to-complete of certain services contracts in the second half of the financial year and some large US contracts with lower margins.

We have grown existing and new accounts during the year, with the Language Services business benefitting from our Global Account Management team that has worked closely with key clients, identifying opportunities where SDL can add value to their business. In particular, Consulting-led sales have enabled our teams to work with clients' senior decision makers, to explore their globalisation needs in greater depth and add more value by packaging solutions to exactly meet their business needs. The Consulting team will be expanded in 2013 within an independent Customer Experience Management division that spans the whole range of SDL solutions, with an initial focus on established major accounts.

SDL's Intelligent Machine Translation (iMT) solution, which integrates SDL's market-leading machine translation technology with specialist human post-editing skills has proven very successful in the year, with iMT penetration across the Language Services client base increasing from 9% to 16%. By providing an even greater level of localization automation, this unique technology-enabled service allows our customers to increase their global communication for the same cost, reduce like for like translation spend by up to 40%, and accelerate time-to-market by decreasing production times by as much as 50%.

New clients in 2012 include Barnes & Noble, SAE, Yokogawa Electric and Husqvana.

Campaign Management, Analytics & Social Intelligence (contributing £21.3 million or 8% of revenue to the group and a break even position at a PBTA level) (not present in 2011 comparatives).

This segment comprises marketing analytics, campaign management and social intelligence technologies, the main components of the Alterian acquisition which completed on 27 January 2012.

The segment has continued to perform ahead of expectations. We are pleased with the level of repeat business and new client wins in particular where the proportion of direct sales has increased to around one third. This approach brings correspondingly higher margins and a reduced dependency on channel sales compared to the operating model under former Alterian ownership.

Improved time to market for new product versions has reinforced the division's reputation in the marketplace. A key element of the products delivered in 2012 was an investment in customer satisfaction which targeted service capability and technical infrastructure. Operating synergies were realised through the integration, funding this investment and a sustained increase in research and development into 2013.

We are pleased to be acknowledged as a strong performer in the Enterprise Listening Platforms Forrester Wave, and to have won the Great Minds for Innovation Award given by the Advertising Research Foundation.

Looking forward, this segment is a truly integral component of SDL's Customer Experience Management proposition. We are very pleased with the acquisition and its integration into SDL, in particular with the cultural fit of the people and the exceptional technology and see significant opportunity to both grow the business and maximise the strategic positioning in the marketplace. As we continue to invest in research and development and sales and marketing, we expect this segment to be marginally profitable in 2013 improving as we move forward into 2014. New customers in 2012 include Land Rover, Majestic Wines Warehouse Limited and Purina.

Gross Margin

The group's gross margin was 56%, a decrease from 58% in 2011.

The reduction was caused by a 4% decrease in Language Services gross margin, that was partly offset by a greater proportion of higher gross margin technology revenue, following the Alterian acquisition.

Technology revenue as a percentage of group total revenue has increased to 44% from 41% in 2011.

Administrative Expenses

In 2012, administrative costs excluding amortisation increased to £115.8 million (2011: £94.2 million). Included in the increase is £17.1 million of incremental cost for 11 months' overheads of the acquired Alterian business, and £0.7 million of one-off professional fees associated with the Alterian acquisition.

Costs have increased organically by 4%, which compares to organic revenue growth of 7% in the year. Cost increases in the period relate to expansion in Asia, where revenue grew organically by 24%, investment in research and development including machine translation and content management technologies, and scaling up sales and delivery resources in growth businesses.

Included within administrative expenses is a credit of £1.1 million (2011: charge of £2.9 million) relating to 2010, 2011 and 2012 Long Term Incentive awards and Option Scheme grants which will not, or are not expected to, vest.

In addition we have added to the Trados shareholder litigation provision during the year which has resulted in a profit and loss charge of £1.5 million (2011: charge of £0.1 million).

Research and development expenditure of £21.8 million is included in administrative expenses, a headline increase of 48% from £14.8m in 2011. Of this increase, £4.9 million or 33% related to the acquired Alterian business, which launched SDL Campaign Manager 2012, SDL Customer Analytics 2012 and SDL SM2 2012. Excluding acquisition effects the business saw an organic increase of 15% in research and development when SDL Fredhopper 2012, SDL Studio Groupshare 2012 and SDL Live Content 2012 were launched.

Development costs have been reviewed, and the Board remains of the opinion that capitalisation criteria under International Accounting Standard (IAS) 38 are not met, and consequently no development costs are capitalised on the balance sheet.

Headcount was 2,985 at the end of 2012, compared to 2,373 at the end of 2011. Included in the increase are 312 employees who joined the group with the acquisition of Alterian on 27 January 2012. Headcount growth was aligned with expanding areas of the business. Employee related costs remain the most significant component of group costs, amounting to 68% of group overheads (2011: 71%).

Intangible assets ascribed to certain of the Group's software and customer relationships arising from acquisitions are amortised between 5 and 15 years and the carrying value is formally reviewed on an annual basis to assess whether there are indicators of impairment. The intangible asset amortisation charge in 2012 was £8.1 million (2011: £5.9 million). The increase is caused by 11 months amortisation of the new Alterian intangible asset during the period. Intangible assets and goodwill were allocated to four existing Cash Generating Units ("CGU") namely Language Services, Language Technologies, Web Content Management and Structured Content Management and a new fifth CGU, Campaign Management, Analytics & Social Intelligence, following the Alterian acquisition. The 2012 impairment review did not result in impairment to any of the CGUs.

Operating Margin

The operating margin, or PBTA margin (profit before tax and amortisation of intangibles divided by revenue, or PBTA %) was 13.2% (2011: 17.3%).

At group level, PBTA margin was diluted by the acquired Alterian business, which contributed 8% before acquisition and other one-off costs. This improved dilution position is due to a combination of cost savings, resilient web support and maintenance revenue, and professional services demands.

Excluding Alterian, acquisition related one-off costs and Language Weaver, which has continued to attract strategic investment in 2012, Group operating margin was 15.7% (2011: 18.9%). The reduction is due to a more cautious view of percentage-of-completion and cost-to-complete of certain services contracts in the second half of the financial year, and a weaker performance in Technology.

Profit before tax and amortisation (PBTA), a primary measure used externally by the investment community, was £35.5 million (2011: £39.7 million).

Earnings Per Share

Earnings Per Share when adjusted for amortisation of intangibles decreased by 9% to 33.77 pence. The deferred tax benefit associated with the amortisation of the intangible fixed assets of £ 1.9 million (2011: £1.6 million) has been adjusted in this calculation of EPS. Basic earnings per share was 26.12 pence (2011: 32.72 pence).

Financing Costs

Interest costs in 2012 amounted to £0.3 million (2011: income of £0.2 million). The increase was attributable to drawing the Group's £20m borrowing facility to partly fund the Alterian acquisition, and £2 million of a new £7 million overdraft facility that was put in place at the time of the acquisition to replace Alterian's drawn overdraft facilities.

In addition, there was a nominal finance lease interest expense associated with assets acquired with Language Weaver in 2010 and Alterian Inc in 2012.

Infrastructure and acquisition integration

SDL has strong core systems and processes which allow us to service our clients effectively and maintain standards of internal control. When opening new sites or integrating a new acquisition, core systems and processes are implemented as soon as practicable with appropriate training to promulgate best practice around the Group.

During the period, Alterian was integrated according to established practice.

Capital Structure

Cash flow

Cash flow from operations was £17.5 million (2011: £32.6 million). Profit to cash conversion decreased, due to the expected reduction in acquired Alterian creditors as overdue trade balances were settled, deal transaction costs were paid and deferred income associated with old non-renewing customer contracts was not replaced. The underlying cash generation of the Group excluding non-recurring items remains strong.

Borrowing Facilities

The Group has a committed £20m facility to February 2014, which was drawn down in January 2012 to partly fund the Alterian acquisition and remained outstanding at December 2012.

Additionally, a £7m overdraft facility to March 2013 was put in place at the time of the acquisition to replace Alterian's drawn overdraft facility, of which £2 million was drawn down and remained outstanding at December 2012. This was repaid in full during January 2013.

Further facilities if required will be put in place in the future.

The Board remains of the opinion that operating with low levels of debt is appropriate in the current economic environment, whilst maintaining sufficient debt facility headroom to finance normal investment activities. The Board believes the strong underlying cash generation of the business will allow repayment of the facility prior to the end of the facility agreement.

Impact of Acquisitions

The Board continues to invest in Research and Development relating to recent acquisitions, with a strong emphasis towards new technologies including machine translation where the strategic opportunity is significant.

Language Weaver continues to dilute earnings in 2012 following planned investments in the period.

The acquisition of Alterian in January 2012 is marginally earnings accretive in the period, ahead of baseline assumptions due to operational cost upsides and stronger demand for professional services in the Web business. This acquisition brings leading marketing analytics, campaign management and social intelligence technologies to SDL. The opportunity to position SDL technologies as a complete Customer Experience Management (CxM) solution is compelling, and the Board has decided to invest in a Consulting-led client engagement team in 2013 to accelerate the CxM opportunity.

The Board will continue to assess acquisition opportunities in the marketplace, which enable the business to accelerate its development of a compelling and uniquely differentiated Customer Experience Management proposition to best serve our global clients.

Derivatives and other Financial Instruments

The Group has cash and short-term deposits of varying durations to fund its working capital needs and other financial assets and liabilities such as trade debtors and trade creditors arising directly from its operations. The Group's policy continued to be that no active trading in financial instruments will be undertaken within the operating units and all decisions on use of financial instruments will be taken at Group level under the direction of the Chief Financial Officer.

Pricing of the current £20 million borrowing facility is a 0.85% to 1.40% margin on London (or equivalent) Interbank Market rates according to the advance date. Which rate applies between the 0.85% - 1.4% margin is dependent on the net borrowings to EBITDA ratio of the Group on the date of the advance. Under the credit facility agreement, SDL is subject to certain financial covenants which are required to be continually monitored. These covenants relate to EBITA: Borrowing Costs; Net Cash Flow: Debt Service Liability and Gross Debt: EBITDA. The Group is also required to maintain a percentage of its cash within a charging group of relevant Group subsidiaries. Since entering into the facility agreement and during 2012 SDL has complied with all of these covenants. This facility was fully drawn in January 2012 to partly fund the acquisition of Alterian, and remains fully drawn at December 2012.

At the start of 2012, a new £7 million overdraft facility was entered into to replace Alterian's overdraft facility. Pricing of the new £7 million borrowing facility is a 1.00% margin on London (or equivalent) Interbank Market rates according to the advance date. £2.2 million was drawn on the acquisition date to replace equivalent drawings under Alterian's old facility, and remained drawn at December 2012. This facility was fully repaid in January 2013.

Taxation

SDL is a global business and as such the principal determinant of the tax rate is primarily dependent on the territorial mix of where operating profits are earned. A detailed analysis of the taxation charge is included in note 4 to the accounts.

The headline effective tax charge for the year as a percentage of profit before tax is 23.9% (2011: 23.8%).

In accordance with the provisions of IAS 38 the Group has recognised deferred tax liabilities in respect of the non-tax deductible amortisation of intangible assets acquired through recent acquisitions. This deferred tax position has been adjusted for the Alterian acquisition made in 2012. The movement of these liabilities in the period has been reflected in the Income Statement and the effect is to provide a tax benefit in future Income Statements associated with the amortisation of those intangible assets.

Due to the adoption of IFRS and the requirements of IAS 12 in conjunction with IFRS 2, the schedule 23 tax credits available for share options exercised, and deferred taxation on unexpired options, has primarily been recorded in equity rather than the Income Statement. The impact of this treatment in the current year is to increase the headline effective tax rate by 2.9% (2011: Decrease of 0.9%).

SDL plc

Consolidated INCOME STATEMENT

for the year ended 31 December 2012

Adjusted earnings per ordinary share (basic and diluted) are shown in note 5.

SDL plc

Consolidated STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2012

SDL plc

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2012

SDL plc

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2012

SDL plc

consolidated STATEMENT OF CASH FLOWS

for the year ended 31 December 2012

SDL plc

notes to the financial INFORMATION

1. BASIS OF ACCOUNTING

Basis of preparation

The financial information set out above does not constitute the Group's statutory financial statements for the years ended 31 December 2012 or 2011. Statutory consolidated financial statements for the Group for the year ended 31 December 2011, prepared in accordance with adopted IFRS, have been delivered to the Registrar of Companies. The auditors have reported on the 2011 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of any emphasis without qualifying their opinion and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

The financial information for the year ended 31 December 2012 has been prepared by the directors based upon the results and position and position that are reflected in the consolidated financial statements of the Group.

The consolidated financial statements of SDL plc and its subsidiaries have been prepared in accordance with International Financial Reporting Standards as adopted by the EU as relevant to the financial statements of SDL plc.

Significant accounting policies

The accounting policies adopted in the preparation of the condensed consolidated financial information are consistent with those followed in preparation of the Group's annual financial statements for the year ended 31 December 2011.

In line with UK Corporate Governance Code requirements the Directors have made enquiries concerning the potential of the business to continue as a going concern. Enquiries included a review of performance in 2012, 2013 annual plans, a review of working capital including the liquidity position and a review of current indebtedness levels. The Directors confirm that they expect strong underlying cash generation and therefore they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Given this expectation they have continued to adopt the going concern basis in preparing the financial information.

2. SEGMENT INFORMATION

The Group operates in the Global Information Management industry. For management purposes the Group is organised into business units based on their products and services and has four reportable operating segments as follows:

·; The Language Services segment is the provision of a translation service to customers' multilingual content in multiple languages.

·; The Language Technologies segment is the sale of enterprise, desktop and statistical machine translation technology developed to help automate and manage multilingual assets together with associated consultancy and other services.

·; The Content Management Technologies segment is the sale of content management technologies developed to help automate and manage content to deliver a consistent, interactive and personalised customer experience, in multiple languages, across websites, documentation, multiple media and channels.

·; The Campaign Management, Analytics and Social Intelligence segment is the sale of campaign management, social media monitoring and marketing analytics technology together with associated consultancy and services.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment prior to charges for tax, deferred compensation related to business combinations and amortisation.

Year ended 31 December 2012

*Acquisition related costs

Year ended 31 December 2011

* Deferred compensation and contingent consideration relating to acquisitions

Segment assets:

(1) Segment assets do not include cash (£28,452,000), Corporation Tax (£1,206,000) and Deferred Tax (£4,395,000).

(2) Segment assets do not include cash (£70,408,000), Corporation Tax (£509,000) and Deferred Tax (£4,976,000).

Geographical analysis of external revenues by country of domicile is as follows:

Geographical analysis of non-current assets excluding deferred tax is as follows:

Goodwill and intangibles recognised on consolidation are included in the country which initially acquired the business giving rise to the recognition of goodwill and intangibles.

3. OTHER REVENUE AND EXPENSES

Group operating profit is stated after charging/(crediting):

The net foreign exchange gains above arose due to movements in foreign currencies between the time of the original transaction and the realisation of the cash collection or spend, and the retranslation of US Dollar and Euro denominated intra-Group loans.

4. INCOME TAX

(a) Income tax on profit:

Consolidated income statement

Consolidated statement of other comprehensive income

A tax credit in respect of share based compensation for current taxation of £549,000 (2011: credit of £523,000) has been recognised in the statement of changes in equity in the year. A tax credit in respect of share based compensation for deferred taxation of £242,000 (2011: debit of £821,000) has been recognised in the statement of changes in equity in the year.

(b) Factors affecting tax charge:

The tax assessed on the profit on ordinary activities for the year is lower than the standard rate of income tax in the UK of 24.5% (2011: 26.5%). The differences are reconciled below:

5. EARNINGS PER SHARE

The calculation of basic earnings per ordinary share is based on a profit after tax of £20,855,000 (2011: £25,736,000) and 79,851,785 (2011: 78,666,436) ordinary shares, being the weighted average number of ordinary shares in issue during the period.

The diluted earnings per ordinary share is calculated by including in the weighted average number of shares the dilutive effect of potential ordinary shares related to committed share options as described in note 7. For 2012 the diluted ordinary shares were based on 80,275,871 ordinary shares that included 424,086 potential ordinary shares.

The following reflects the income and share data used in the calculation of adjusted earnings per share computations:

There have been no material transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of this financial information.

6. INTANGIBLE ASSETS

Customer relationships and intellectual property are written off on a straight-line basis over their estimated useful lives of between 5 and 15 years. As from 1 January 2004, the date of transition to IFRS, goodwill is no longer amortised but is now subject to annual impairment testing.

7. SHARE-BASED PAYMENT PLANS

SDL Share Option Scheme

The table below sets out the number and weighted average exercise prices (WAEP) of, and movements in, the SDL Share Options Scheme during the year:

The weighted average share price at the date of exercise for the options exercised is £6.63 (2011: £6.33).

For the share options outstanding as at 31 December 2012, the weighted average remaining contractual life is 5.64 years (2011: 5.95 years).

The fair value of equity settled share options granted under the SDL Share Option Scheme is estimated as at the date of grant using the Black Scholes model. The following table lists the inputs and key output to the model:

The range of exercise prices for options outstanding at the end of the year was £1.17 - £7.48 (2011: £0.34 - £6.07).

SDL Long Term Incentive Plan

The fair value of equity-settled shares granted under the SDL Long Term Incentive Plan is estimated as at the date of grant using a Monte-Carlo model, taking into account the terms and conditions upon which the options were granted. The following table lists the inputs and key output to the model in the year of grant:

All LTIPs are exercisable at nil cost to the individual (with the exception of the 1p nominal value of each share awarded).

SDL Save As You Earn Scheme (SAYE)

The table below sets out the number and movements in, the SDL Save As You Earn Scheme during the year:

For the SAYE shares outstanding as at 31 December 2012, the weighted average remaining contractual life is 1.86 years (2011: 1.93 years).

The fair value of equity settled share options granted under the SDL SAYE Scheme is estimated as at the date of grant using the Black Scholes model. The following table lists the inputs and key output to the model in the year of grant:

8. ADDITIONAL CASH FLOW INFORMATION

Analysis of group net debt:

9. BUSINESS COMBINATIONS

Acquisition of Alterian plc

On 27 January 2012 the Group acquired 100% of the share capital of Alterian plc, a listed company based in the United Kingdom. The principal activity of the Alterian plc group is the provision of marketing analytics, social media monitoring and campaign management.

The total cost of the combination comprises £73.2million. £20 million of the cost of the acquisition was funded by draw down of the Group facility and the remainder was funded from the Group's existing cash resources.

The fair value of the identifiable assets and liabilities of the Alterian plc group as at the date of acquisition were:

From the date of acquisition Alterian plc group has contributed £28.4 million of revenue and a profit of £2.3 million to the net profit after tax of the Group. If the combination had taken place at the beginning of the year, the profit, after taxation, for the Group would have been £21.1 million and revenue from continuing operations would have been £271.7 million. Included in the £72.3 million of goodwill recognised above are certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include assembled workforce and buyer specific synergies.

10. EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE

On 8 February 2013, the Group acquired 100% of Bemoko Limited (an unlisted company based in England) for £1.9 million, of which £1.1 million is payable immediately and was funded from the Group's existing cash reserves. The principal activity of Bemoko Limited is a provider of mobile web solutions. Additional disclosures required under IFRS3 (Revised) will be included in the 30 June 2013 Interim Report once the initial accounting for the business combination has been completed.

There are no other known events occurring after the statement of financial position date that require disclosure.

The Directors are recommending that a final dividend for the year ended 31 December 2012 of 6.1 pence per ordinary share be paid to the shareholders whose names appear on the register at the close of business on 17 May 2013 with payment on 14 June 2013. The Ex-dividend date will be 15 May 2013. This recommendation will be put to the shareholders at the Annual General Meeting.