SDL plc ("SDL" or "the Group"), the globalization products and solutions company, is pleased to announce its unaudited preliminary results for the twelve months to 31 December 2001.

 Highlights:

• Turnover up over 13% to £33.7m (2000: £29.7m)
• EBITDA losses of £1.4 m (2000: profits of £2.9m) including software development costs of £3.2m, which are written off as incurred
• Pre tax loss (before amortisation of goodwill and intangibles) of £2.0m (2000: profit of £2.6m)
• Loss per share of 11.56p per share (2000: earnings of 1.00p per share)
• Gross margin at 46% (2000: 49%) reflecting the prevailing poor market conditions during the period
• Acquisition of Alpnet, Inc. ("Alpnet") for £4.7m and a Placing raising £7.2m since the year end, consolidating SDL's position as one of the world's largest globalization/localisation companies.
• Restructuring of Alpnet continues ahead of schedule
• Following the acquisitions of machine translation technology (TranscendRT™) and Alpnet, SDL can now offer its customers the full range of globalization services and software
• Cash at year-end was £9.0m (2000: £13.1m) excluding the share Placing in January 2002
  
  

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

"Despite a very heavy recession in most of our key markets, particularly in America, SDL has demonstrated another year of progress through organic and acquisitional growth. The poor market conditions have continued into the current financial year yet SDL continues to dominate a sector that is beginning to show signs of a slow recovery. Following the acquisitions in the last two years and Alpnet in January this year, SDL now has the critical mass, global infrastructure and the required technology to grow the business organically. The restructuring of Alpnet is continuing ahead of schedule and we have been successful in reducing the ongoing costs."

For further information please contact:

Mark Lancaster
Chairman & Chief Executive
During the morning - Tel: 020 7466 5000
Thereafter - Tel: 01628 410127

Bobby Morse/Louise Bolton
Buchanan Communications
Tel: 020 7466 5000
Bobbym@buchanan.uk.com

Attached:

• Chairman's statement
• Unaudited Consolidated Profit and Loss Account
• Unaudited Consolidated Balance Sheet
• Unaudited Consolidated Cash Flow Statement
• Notes to the unaudited Financial Statements

STATEMENT OF CHAIRMAN AND CHIEF EXECUTIVE

OVERVIEW

2001 proved to be an extremely difficult year for a number of the markets that SDL operates in, particularly the US. Despite these economic conditions, the Group achieved revenue growth of 13% in the financial year. SDL's business strategy remains focused on clients operating in international markets.

The two acquisitions early in 2001 (a division of Sykes Enterprises and a division of Transparent Language) have been fully integrated into the Group and enable SDL to offer a comprehensive globalization solution, not only to some of the world's largest companies but also to smaller and medium-sized businesses. As a result of our technology acquisitions and their integration into the existing SDL product base, the Group is now the world-wide leader in fully integrated multilingual-enabling technology. To help achieve this, SDL incurred research and development costs of £3.17 million during the year (2000 - £1.61 million).

SDL's strategy is unchanged: we will continue to further consolidate the Group's position of being the pre-eminent provider of globalization solutions to international businesses. While trading conditions have remained difficult, the financial resources of the Group have enabled us to continue this strategy, and we are seeing signs of increasing adoption of multilingual system solutions. The acquisition of Alpnet in February 2002 is a further indication of the Group's strategy to remain at the forefront of the industry. The resultant approximate doubling of the Group's size provides significant market profile and financial stability, whilst also enabling SDL to leverage its development expenditures and spread these costs over a broader services revenue base.

FINANCIAL PERFORMANCE

The Group's turnover increased from £29.73 million to £33.66 million, an increase of 13%. Acquisitions contributed £3.12 million, with organic growth from the existing businesses contributing £0.81 million, an increase of 3%. Although lower than previous years, our organic growth in a temporarily static market was created from wider industry recognition of SDL, created by the establishment of the Group's complete product and service solution. Products and product-related sales contributed £1.14 million (2000 - £2.14 million; the prior year figures include a one-off product-related services contract amounting to £1.46 million).

SDL's gross margin percentage fell from 49% to 46%, reflecting the difficult trading conditions and some pricing pressure within the market. The Group restricted the negative effect of the declining gross margin by a constant review of the direct costs of production, and by continuing to maintain a tight rein on external vendors. The continued profitability of the service business enabled the Group to maintain its commitment to developing globalisation solutions technology. Earnings before interest, depreciation and amortisation (EBITDA) was a loss of £1.44 million (2000 – profit of £2.89 million). The operating loss was £5.54 million (2000 – profit of £0.52 million) and the loss before tax was £5.10 million (2000 - profit of £1.06 million).

The loss per share for 2001 was 11.56p (2000 – earnings per share 1.00p) and the Group completed the year with cash resources of £9.00 million (2000 - £13.08 million). Acquisitions and related expenditures accounted for £2.79 million of the reduction in the net cash resources.

ACQUISITIONS

The consolidation in the globalization industry, both in respect of service and technology, continued through 2001 and into the current year. SDL supports strategic investments in both these areas and seeks to enhance shareholder value through acquisition, as well as organic growth. In January 2001, SDL acquired the localisation business of Sykes Technologies, Inc. for £0.37 million (US$0.56 million). Sykes had three locations based in Belgium, Edinburgh and Boulder, Colorado. This latter location provided SDL with a production and service capability within the US, an essential component in our infrastructure for handling certain customer requirements in the North American markets.

On 15 February 2001 the Group completed the acquisition of the Automatic Real-Time Translation division of Transparent Language, Inc. for a total consideration of £6.18 million (US$9.0 million), satisfied by £1.02 million in cash and through the issue of £5.16 million in Ordinary shares. The assets acquired included the intellectual property rights to certain automated translation technology and related products, including Transcend and the Enterprise Translation Server. The latter provides instant translation of e-mail, web pages, instant messaging, documents, spreadsheets and presentations. This technology has been integrated into SDL's other product offerings and is dealt with in more detail in the Products section below.

In December 2001, the Group launched a tender offer to acquire all the share capital of Alpnet, one of SDL's major competitors in the globalization industry. Alpnet has a strong customer base in countries and vertical industry sectors where SDL does not yet have a significant presence. In particular the Alpnet group has significant businesses in Canada and Germany, as well as substantial Asian production facilities and a material share of the automotive sector. The Directors of SDL believe that this latter sector is an example of an industry that lends itself to greater automation of the localisation process and hence represents a beneficial target for the enlarged Group's technology focus.

The acquisition of Alpnet for £4.72 million (US$6.83 million) plus the assumption of £5.70 million (US$8.04) million of debt was successfully completed on 1 February 2002. The associated tender and open offer was successful, resulting in a placing of 11.28 million shares with existing and new institutional shareholders and raising £6.07 million after expenses. This money will be used to fund certain restructuring initiatives, to repay a portion of the Alpnet debt and to provide working capital for the enlarged Group.

Since the time the acquisition was completed, the management team has been reviewing all aspects of the Alpnet Group with a view to its restructuring and integration into SDL. A significant amount of insight was gained through the due diligence process and this, together with the experience gained by our successfully integrating ITP's business in 2000, has already had a positive effect in the short period of time since the deal's completion. The duplicated facilities in the UK and USA have been closed down at lower than expected cost, and Alpnet's clients are being integrated into SDL's production facilities. Management has also negotiated the earlier and lower settlement of certain of Alpnet's liabilities assumed at the time of the transaction. The integration to date has been encouraging, with restructuring running ahead of plan and below budget, as has the response from both Alpnet's employees and customers.

In October 2001, a smaller transaction was completed to acquire Language Partners International (LPI), a reseller and distributor of desktop applications for the localisation industry and related service sectors. Until the time of the transaction LPI had concentrated on selling competitive products to SDL's, but is now concentrating on the full SDL Localization Suite, particularly in the North American market

PRODUCTS

SDL's Enterprise Products comprise SDLWebFlow, SDLWorkFlow (a new extension of our SDLWebFlow core technology) and the Enterprise Translation Server ("ETS"). The strategy behind this is to provide product solutions for the large potential markets where human translation on its own is too expensive or not timely enough. There is a growing demand for this capability in many markets, such as the financial sector for more instantaneous translation of information and research with a valuable but short lifespan.

During 2001 the Group has continued to pursue dual sales and marketing strategies aimed at creating strong partnerships while at the same time deploying a direct sales force targeted at vertical industry sectors. On the partnership front the Group has linked up with such content management specialists as Gauss and Obtree and announced the integration of SDLWebFlow with the Microsoft Content Management Server. In September SDL signed an agreement with ICL for the latter to resell SDLWebFlow. The direct sales force has been successful in selling ETS into a wider variety of industry sectors than our traditional localisation solution offering. This has included customers such as Belga (The Belgian Press Agency), GMAC (the commercial mortgage arm of General Motors), NCR, Sybase and Compendium (Trias Politica Online, for procurement and supply chain management).

While our Enterprise product technologies provide major steps forward in providing globalization solutions, the Desktop products are continuing to provide cost and efficiency opportunities for companies and individuals working in the localisation industry. In August 2001 the Group released SDL Localization Suite, a comprehensive set of products giving localisation agencies a seamless set of products to assist in the translation and QA process for software and document translation, and for editing through to test validation. The important factor here is that in addition to offering a "one-stop shop" to the localisation industry, the Localization Suite is assisting in raising the quality and profile of the localisation industry and is enhancing returns on investment for SDL and its Desktop customers. These developments also have the added advantage of enabling the Group to enhance gross margins in its own service divisions.

SERVICES

The services element of the globalization solutions offered by the Group has benefited on two fronts during the year: the association with the marketing and selling of technology and with the acquisition of a number of additional production locations. This will be further enhanced by the integration of the Alpnet Group in the first half of 2002. The cash flow generation of the services business remains an integral part of SDL's overall business strategy and provides a solid platform to further develop the Enterprise and Desktop Products divisions.

While the underlying organic growth in the service business in 2001 was well below that of earlier years, the Board believes that this growth rate has been in advance of the rest of the industry. As a result of the economic slowdown, a number of major clients scaled back on their product changes and offerings, or reduced the number of languages being localised, or both. The above difficulties in the industry as a whole were mitigated in part by the strength of the Group's repeat business from its larger clients. These include Adobe, Avaya, Hewlett-Packard, Iomega, Kodak, Lexmark, Lotus, Microsoft, Oracle, Siebel Systems, Sony, Sun Microsytems and 3Com. While no one customer provided for more than 10% of the turnover, there were a number of strong contributors in the 3%-5% range that provided the Group with consistent and good-margin business. This, combined with a close watch on utilisation and headcount, enabled the Group to maintain strong gross margins despite the industry slowdown.

BOARD APPOINTMENT

As noted in my Interim Statement, John Matthews was appointed as a Non-Executive Director on 15th June 2001. John has been Chairman of Crest Nicholson plc since 1996, is Chairman of Media Systems Group and also acts as an independent director on the boards of three other listed companies. John has assumed the chairmanship of SDL's Audit Committee and has already taken an active role in the stewardship of the Company.

STRATEGY AND PROSPECTS

SDL is at the forefront in the development of product-based solutions for assisting companies to reach a global audience. Significant investment continued on plan throughout 2001 to develop software products for the future global needs of international companies and to maintain the Group's leading position in the industry. The combination of our products and services enables clients to rapidly translate and maintain multilingual content, a key evolving requirement for multinational companies to be successful in global markets. Our products and solutions have been developed significantly over the past years by both internal SDL resources and acquisitions of key technologies.

The evolution of the need for automation and workflow in globalization solutions has been the cornerstone of SDL's strategy to be the major force in the globalization industry. This has been the rationale behind the development of software solutions and the Directors believe that our real-time translation engine technology combined with computer-aided translation memory and workflow solutions will provide the significant step forward that is needed in the field of automated translation. The strength of the service side of the business and our strong balance sheet has enabled the Group to maintain and enhance its position in the industry.

The current financial year has started in line with our conservative expectations and the Board anticipates that 2002 will continue to remain somewhat soft. As noted above, the integration of Alpnet is going well and according to plan, and there will be additional operational and financial benefits arising from putting the two groups together. On the technology front, interest continues to be shown in the products and solutions across a growing number of industries and organisations.

Though the concept of globalization remains in its early stages, SDL continues to benefit from significant demand for its services and products from well-established high-tech and blue-chip customers. In order to best address a more educated global market and to improve upon the significant lead of SDL's technology, the Board will continue the investment in the development of products, particularly with the launch of new generation translation technology later in the year. However, with the advances made in 2001 and the acquisition of Alpnet, the level of development expenditure is not expected to increase in 2002 and will be significantly reduced as a percentage of the overall revenues of the enlarged Group.

As communication across countries and boundaries increases, and as electronic commerce acts as a catalyst for this process, the market requirements for instant and high quality translated material allowing corporations, governments and other institutions to effectively communicate across these boundaries will become more and more important. SDL's technology and localisation services provide the fundamental building blocks for these needs.

Mark Lancaster

Chairman

UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 DECEMBER 2001