Final Results

7 March 2011

SDL PLC

Preliminary results for the year ended 31 December 2010

Strong year of progress with positive revenue growth across all operating segments, significant advancement in GIM solution adoption

SDL plc ("SDL" or "the Group"), the leading provider of Global Information Management (GIM) solutions, announces its unaudited preliminary results for the year ended 31 December 2010.

Operational highlights

- Strong growth in revenue and profit before taxation and amortisation

- Accelerated investment in growth, innovation investment increase of £2.6 million

- New customers include Affinion, Fidelity Investments, Saab, United Airlines, Virgin Money  and AstraZeneca

- Accelerated adoption of GIM solution set based on rapid commercial development of end-to-end content management offer, strong leverage in Structured Content Technology

- Four new product launches, two in Structured Content Technology and two in Language Technologies, next generation statistical machine translation platform launched with SDL BeGlobal

- Two further strategic acquisitions strengthen positioning:

o Language Weaver in Language Technologies gives SDL leading edge statistical machine translation capability

o Xopus in Structured Content Management expands technical content creation possibilities to non technical authors

- Business remains strongly cash generative: cash balance of £46.6 million after net cash outflow of £25.9 million on acquisitions. Group has no external debt

- Given confidence in business model, maiden dividend of 5.5 pence per ordinary share has been recommended by the board

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

"We are delighted to report a year of strong strategic progress, record revenue and excellent operating profit performance. In the period we saw a steadily improving demand environment for our technology and services. We were particularly pleased with the levels of cross-selling of products and services achieved during the year, delivering broader Global Information Management solutions that address our customers' strategic needs."

"We are pleased to report double digit headline revenue growth in each of our operating segments, which bears testament to the resilience of the business to the economic cycle. Headline Group revenue growth comprised acquisition related growth of 4%, a negligible impact due to foreign exchange and constant currency revenue growth of 14%. We finished the year strongly, particularly in our Web Content Management business, where changes in organisational structure built positive momentum. In general, we are confident that the demand pipeline in each operating segment remains robust moving into 2011."

"Our balance sheet remains a considerable source of competitive advantage and comfort as we have no external debt. At the end of 2010 we had £46.6 million of cash on the balance sheet. Given our confidence in future cash generation and ability to sustain strategic and operational progress the board is recommending a maiden final dividend to the Annual General Meeting of 5.5 pence per ordinary share."

"We increased our strategic investments in 2010, accelerating investment in innovation, research and development, and supporting our growth in Asian territories. We introduced several new products to market in 2010: SDL BeGlobal a next generation statistical machine translation technology; SDL Trisoft with enhanced DITA support; SDL Contenta S1000D in the structured content management space; and we launched SDL Global Authoring Management System 2010 in Language Technologies."

Commenting on current trading, John Hunter, Chief Executive Officer, added:

"Initial trading is positive in 2011 and in the absence of a major economic reverse we are confident that 2011 will be another good growth year for SDL. Economic signs are still variable in some segments but we are seeing a more sustained recovery in demand."

"We have made solid progress in integrating the two businesses acquired in 2010, and have strengthened our executive management team. We believe we have a sound platform and the right strategy in place. We have no debt and our cash position gives us solid opportunity to pursue further strategic growth options, both organic and through acquisition, should they arise."

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About SDL

SDL is the leader in Global Information Management. Global Information Management enables companies to engage with their customers throughout the customer journey - from brand awareness, to sales and after-sales support - and across languages, cultures and channels.

SDL's best-of-breed Web Content Management, eCommerce, Structured Content and Language Technologies, combined with its Language Services drive down the cost of content creation, management, translation and publishing. SDL solutions increase conversion ratios and customer satisfaction through targeted information across all customer touch points.

Global industry leaders who rely on SDL include ABN-Amro, Bosch, Canon, CNH, FICO, GlaxoSmithKline, Hewlett-Packard, KLM, Microsoft, NetApp, Philips, SAP and Sony. SDL has over 1500 enterprise customers, has deployed over 170,000 software licenses and provides access to on-demand portals for 10 million customers per month. It has a global infrastructure of more than 60 offices in 35 countries. For more information, visit www.sdl.com.

Executive Chairman's Statement 

Summary Performance

We are delighted to report a year of strong strategic progress, record revenue and excellent operating profit performance. In the period we saw a steadily improving demand environment for our technology and services. We were particularly pleased with the levels of cross-selling of products and services achieved during the year, delivering broader Global Information Management solutions that address our customers' strategic needs.

We increased our strategic investments in 2010, accelerating investment in innovation, research and development, and supporting our growth in Asian territories. We introduced several new products to market in 2010: SDL BeGlobal a next generation statistical machine translation technology; SDL Trisoft with enhanced DITA support; SDL Contenta S1000D in the structured content management space; and we launched SDL Global Authoring Management System 2010 in Language Technologies.

We made two strategic acquisitions during the year. The acquisition of Language Weaver gives SDL an industry leading position in statistical machine translation. By further increasing the speed of translation, we believe this acquisition will significantly increase the volume of content that companies can economically choose to translate. The acquisition of Xopus increases technical content creation possibilities by facilitating content creation by non technical authors. Both of these acquisitions further strengthen the SDL end-to-end content management offering. The Xopus business is now fully integrated into our Structured Content Management Technologies business and is therefore reported as part of the Content Management Technologies operating segment. Language Weaver is reported as part of our Language Technologies operating segment which is run as an integrated global business under common leadership.

The executive team was further strengthened with the appointment of Mark Reid as Chief Information Officer and Dennis van der Veeke as Chief Technology Officer, both key appointments.

Revenue for 2010 was £203.5 million (2009: £171.9 million). Operating profit before taxation and amortisation of intangible assets ("PBTA") for the period was £35.4 million (2009: £29.8 million) with profit before taxation of £28.8 million (2009: £24.0 million). Net cash in the business at the end of the period was £46.6 million (2009: £46.2 million) after net cash outflow of £25.9 million due to acquisitions during the year.

We are pleased to report double digit headline revenue growth in each of our operating segments, which bears testament to the resilience of the business to the economic cycle. Headline Group revenue growth comprised acquisition related growth of 4%, a negligible impact due to foreign exchange and constant currency revenue growth of 14%. We finished the year strongly, particularly in our Web Content Management business, where changes in organisational structure built positive momentum. In general, we are confident that the demand pipeline in each operating segment remains robust moving into 2011. We have made excellent progress in cross-selling solutions, the Content Management segment in particular, recording constant currency revenue growth of 21%, has been a prime beneficiary of this cross-selling approach. We are very pleased with the two acquisitions, Xopus and Language Weaver, both now fully integrated from a leadership, systems and execution perspective. This rapid integration puts us in a good position to execute our growth strategy aspirations in these businesses in 2011.

Our operating cash flow from operations amounted to £27.1 million in 2010 (2009: £30.1million). We were unable to repeat the working capital inflow we saw in 2009 when we significantly reduced receivable days, however our average DSO has been marginally improved in 2010 with strong exit revenues generating higher receivables. Our profit to cash conversion remains excellent. Our balance sheet remains a considerable source of competitive advantage and comfort as we have no external debt. At the end of 2010 we had £46.6 million of cash on the balance sheet. Given our confidence in future cash generation and ability to sustain strategic and operational progress the board is recommending a maiden final dividend to the Annual General Meeting of 5.5 pence per ordinary share. This will not alter our strategy of pursuing strong profitable growth but will provide a return to those investors who value a nominal yield in addition to growth. Our future dividend policy will be progressive.

Segmental Performance

We continue to report the business in three operating segments in 2010 as our shareholders find this additional disclosure valuable. Our operating segments are Content Management Technologies, Language Technologies and Language Services.

Content Management Technologies (contributing £45.0 million or 22% of revenue to the Group and £7.7 million or 22% of Group PBTA) (2009: contributing £33.2 million or 19% of revenue to the Group and £6.4 million or 22% of Group PBTA)

Overall revenue in this segment grew by 36%, 16% due to acquisition, -1% due to foreign exchange and 21% growth at constant currency. We are delighted by the performance of this segment, which reflects strong cross leveraging from the rest of the SDL Group,

SDL Web Content Management Solutions performed well. Both Europe and North America had strong second half performance. Structured Content Management made exceptional progress in 2010, with the combination of traditional XyEnterprise strengths with SDL Trisoft continuing to be a potent combination and market innovator. We look to 2011 with confidence in this business from a position of industry leadership in technical document Xml publishing, component content management and Live Content solutions.

We were pleased to welcome as clients investing in Content Management Technology, Unilever, Atmel, Affinion, Fidelity Investments, Saab, United Airlines and Virgin Money.

Language Technologies (contributing £33.9 million or 17% of revenue to the Group and £3.3 million or 9% of Group PBTA) (2009: contributing £29.1 million or 17% revenue to the Group and £3.5 million or 12% of Group PBTA)

Overall headline sales growth was 17% in the Language Technologies business of which 8% was due to acquisition, currency impact was negligible and constant currency revenue growth was 9%.

We saw consistent demand stabilisation in the Enterprise business and solid momentum build in our desktop business in the second half reflecting our demand generation initiatives and considerable expansion in China. We have made significant progress integrating Language Weaver into the Language Technologies business unit. Language Weaver performance versus equivalent period in 2009 was robust and we continue to invest heavily in statistical machine translation in order to rapidly expand the addressable market for both commercial and government sectors.

Clients investing in Language Technologies in 2010 included Total, National Cancer Institute, Novartis, European Patent Office, Avaya and TripAdvisor.

Language Services (contributing £124.6 million or 61% of group revenue and £25.2 million or 71% of Group PBTA). (2009: contributing £109.6 million or 64% of group revenue and £19.8 million or 66% of Group PBTA).

2010 was a strong year for the Language Services segment. Significant account growth and new customer wins led to organic revenue growth of 14% with negligible currency impact. The business made significant progress in North America and execution was strong in Asia against a strategic goal of building position in Japan, China and Korea. The business had several significant new client wins in 2010 including AstraZeneca, Dassault Systemes, Regus, FlexLink and VMWare. The business remains highly profitable and cash generative and we have continued to focus on effective global sourcing strategy and network optimisation in 2010, making two strategic commitments to opening offices in Turkey and Chile. Statistical machine translation is proving highly complementary to our core language services offering, driving efficiencies and competitive advantage.

Global Information Management Vision and Strategy

In 2010 we made significant progress in building our end-to-end content management solutions and we have clear plans to leverage our broadened capabilities and offerings in 2011. It is clear to us that SDL's solutions can play a compelling role helping our clients engage with their clients in a consistent way across multiple languages and channels, thereby optimising the experience of their own clients through content use. We build brand equity for our clients and accelerate globalisation and roll out of new products. SDL's vision is aligned to macro-trends such as growth of the internet, the accelerating adoption of cloud-based computing, the globalisation of businesses, and the continued rapid growth of Asian economies. Within our client base and internally at SDL there is a rapid movement towards live and collaborative content, personalisation and targeting and we have a range of scalable end-to-end solutions to meet these needs.

We are committed to remain the innovator in the Global Information Management space and look to a future which is about seamless product integrations and leading edge product innovation combined with consistent execution and delivery. The acquisition of Language Weaver and Xopus extend solution set availability and should increase accessible market size and ability to penetrate. More and more clients are realising the power of combined use of our Web Content Management, Structured Content Management and Language Technologies. We are also committed to make each client's experience with SDL an engaging and compelling one.

Outlook and Current Trading

Initial trading is positive in 2011 and in the absence of a major economic reverse we are confident that 2011 will be another good growth year for SDL. Economic signs are still variable in some segments but we are seeing a more sustained recovery in demand.

We have made solid progress in integrating the two businesses acquired in 2010, and have strengthened our executive management team. We believe we have a sound platform and the right strategy in place. We have no debt and our cash position gives us solid opportunity to pursue further strategic growth options, both organic and through acquisition, should they arise.

We have an exciting year in prospect in 2011, with Tridion 2011 a next generation Web Content Management product with strong integration to other SDL technologies already released to market and an exciting roadmap of innovation looking ahead.

We are therefore confident in our growth prospects and our long term potential to reward investors with continued profitable growth and strong shareholder returns.

Mark Lancaster

Executive Chairman

SDL plc

UNAUDITED Consolidated INCOME STATEMENT

for the year ended 31 December 2010

Adjusted earnings per ordinary share (basic and diluted) are shown in note 6.

SDL plc

UNAUDITED Consolidated STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2010

SDL plc

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2010

SDL plc

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2010

SDL plc

UNAUDITED consolidated STATEMENT OF CASH FLOWS

for the year ended 31 December 2010

SDL plc

notes to the UNaudited financial statements

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 2010 or 2009. Statutory consolidated financial statements for the Group for the year ended 31 December 2009, prepared in accordance with adopted IFRS, have been delivered to the Registrar of Companies. The auditors have reported on the 2009 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 statutory consolidated financial statements for 2010 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies in due course.

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 statements are consistent with those followed in preparation of the Group's annual financial statements for the year ended 31 December 2009, except for the adoption of new Standards and Interpretations as of 1 January 2010, noted below:

IFRS 3 Business Combinations

The Group adopted the revised standards from 1 January 2010. IFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after this date. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. Transaction costs are recognised in administration expenses. These changes impact the amount of goodwill recognised in the reported results in the period that an acquisition occurs and future reported results. IAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions no longer give rise to goodwill, nor give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes required by IFRS 3 (Revised) and IAS 27 (Amended) will affect future acquisitions or loss of control of subsidiaries and transactions with non-controlling interests. The change in accounting policy was applied prospectively and had no material impact on earnings per share or the results for the period ended 31 December 2010.

2. BUSINESS COMBINATIONS

Acquisition of Language Weaver Inc.

On 23 July 2010 the Group acquired 100% of the share capital of Language Weaver Inc., an unlisted company based in the United States of America. The principal activity of Language Weaver Inc. is the provision of Machine Statistical Translation.

The total cost of the combination comprises $41.5 million (£26.9 million) and was funded from the Group's existing cash resources.

The provisional fair value of the identifiable assets and liabilities of Language Weaver Inc. Group as at the date of acquisition were:

All fair values included in the above analysis are provisional fair values which are based upon management's best estimate at the date of preparation of the financial statements.

From the date of acquisition Language Weaver Inc. has contributed £4.3 million of revenue and a loss of £0.4 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 £19.7 million and revenue from continuing operations would have been £207.0 million. Included in the £20.0 million of goodwill recognised above are certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. The Board consider that a significant value remains in assembled workforce, buyer specific synergies and technical expertise.

Acquisition of Xopus B.V.

On 29 June 2010 the Group acquired 100% of the share capital of Xopus B.V., an unlisted company based in the Netherlands. The principal activity of Xopus B.V. is the provision of online XML editing.

The total cost of the combination comprises €1.5 million (£1.2 million) and was funded from the Group's existing cash resources.

The provisional fair value of the identifiable assets and liabilities of Xopus B.V. as at the date of acquisition were:

All fair values included in the above analysis are provisional fair values which are based upon management's best estimate at the date of preparation of the financial statements.

The maximum contingent consideration is £1.6 million. The fair value has been calculated at £0.2 million and under IFRS 3 (revised) any re-measurement will be recognised in the income statement.

From the date of acquisition Xopus B.V. has contributed £0.2 million of revenue and a loss of £0.1 million to the net profit after tax of the Group. If the combination had taken place at the beginning of the year, the profit for the Group would have been £22.0 million and revenue from continuing operations would have been £203.7 million. Included in the £1.0 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.

3. 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 three reportable operating segments as follows:

·; The Language Services segment is the provision of a translation service to customer's 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 and channels.

Within the Content Management Technologies segment two operating segments have been aggregated to form the above reportable operating segment.

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.

*Deferred compensation relating to acquisitions

Unallocated assets include cash, loans and taxation.

Segment assets:

(1) Segment assets do not include cash (£46,628,000), Corporation Tax (£945,000) and Deferred Tax (£6,356,000).

(2) Segment assets do not include cash (£46,160,000), Corporation Tax (£1,002,000) and Deferred Tax (£5,621,000).

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.

4. OTHER REVENUE AND EXPENSES

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

The net foreign exchange (gains) / losses 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 loans.

5. 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 £557,000 (2009: credit of £635,000) 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 £342,000 (2009: debit of £220,000) 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 28% (2009: 28%). The differences are reconciled below:

6. EARNINGS PER SHARE

The calculation of basic earnings per ordinary share is based on a profit after tax of £22,044,000 (2009: £17,944,000) and 77,640,587 (2009: 76,200,428) 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 8. For 2010 the diluted ordinary shares were based on 80,320,829 ordinary shares that included 2,680,242 potential weighted number of options.

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

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of the financial statements.

7. INTANGIBLE ASSETS

In 2009, an adjustment of £429,000 was made to goodwill in respect of a deferred tax asset not recognised at the date of the Trados acquisition utilised during the year.

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

8. 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 £4.88 (2009: £3.41).

For the share options outstanding as at 31 December 2010, the weighted average remaining contractual life is 5.94 years (2009: 3.66 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 to the model:

The range of exercise prices for options outstanding at the end of the year was £0.34-£5.48 (2009: £0.01-£3.745).

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 to the model used for the year ended 31 December 2010.

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 weighted average exercise prices (WAEP) of, and movements in, the SDL Save As You Earn Scheme during the year:

For the SAYE shares outstanding as at 31 December 2010, the weighted average remaining contractual life is 1.37 years (2009: 2.32 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 to the model in the year of grant:

9. ADDITIONAL CASH FLOW INFORMATION

Analysis of group net debt:

10. POST STATEMENT OF FINANCIAL POSITION EVENTS

There are no known events occurring after the date of the Statement of Financial Position that require disclosure. The Directors are recommending that a final dividend for the year ended 31 December 2010 of 5.5 pence per ordinary share be paid to the shareholders whose names appear on the register at the close of business on 6 May 2011 with payment on 3 June 2011. The ex-dividend date will be 4 May 2011. This recommendation will be put to the shareholders at the Annual General Meeting.

11. POST PERIOD END CHANGES TO THE BOARD

On 17 January 2011, SDL announced several changes to the Board as part of a carefully planned succession process that brings absolute clarity to the future board structure of SDL.

Mr. John Hunter, Chief Financial Officer of SDL, was appointed to the role of Chief Executive Officer with effect from 1 February 2011 with Mr. Mark Lancaster, retaining his role as Executive Chairman.

Mr. Matthew Knight has been appointed Chief Financial Officer replacing John Hunter and will join SDL towards the end of April 2011. Mr Knight is currently employed by Logica plc, where he is Chief Financial Officer for Northern & Central Europe and is a member of the Institute of Chartered Accountants of England and Wales.

Mrs. Cristina Lancaster will leave the board at the end of March 2011 but will continue to work in SDL in a part-time position supporting the Chief Information Officer, Mark Reid, on internal systems development and strategy utilising her considerable knowledge and experience of the company.

At the same time, SDL also announced its intention to further strengthen the board in 2011 with the appointment of at least one additional Independent Director.