SDL plc (“SDL” or “the Group”), the world’s leading provider of global information management (GIM) solutions, is pleased to announce its unaudited interim results for the six months ended 30 June 2005.

Chairman's Statement

Summary Performance

The first half of 2005 saw SDL achieve record sales and operating profits. This performance was achieved in highly competitive markets with slowing worldwide economies. We have also witnessed an increase in demand for enterprise software solutions in the mid-size and large enterprise customers. We believe this demand is fueled by companies looking for solutions to grow their global markets to stimulate their top line growth.

We attribute this success to our long-term strategy of investment in technology and our integrated network office infrastructure. SDL’s long term strategy has improved the quality and consistency of our language services, raised our productivity levels and increased revenues and profits from software sales. Through the creation of local language production centres, low cost production units and main stream hubs SDL has become a central vendor to customers such as Adobe, Bosch, Microsoft, Case New Holland and HP, by being able to offer advanced solutions to their evolving needs.

Our Technology

Our technology continues to be a key driver in the market, with our enterprise technology becoming increasingly important to accelerate time to market, at reduced cost. The SDL Knowledge-based Translation System (“SDL KbTS”) which combines automated translation, translation memory and terminology technologies with highly-skilled human resources to increase translation throughput, has achieved the success that we predicted for its initial customers, and remains a key strategic focus for SDL. Our customers have seen the time to market halved and realised significant cost savings as a result of SDL KbTS managed projects.

New Advances creating a Technology Ecosystem

The first half of 2005 saw several major product enhancements and the introduction of innovative products.
• SDL Translation Management System 2005 provides a framework for global information management enabling organisations to deliver global information faster, improve quality and consistency and achieve rapid return-on-investment
• SDL PhraseFinder 2005 leverages patent-pending technology to quickly and effectively identify terminology being used by an organisation
• SDL AuthorAssistant 2005 is innovative new technology that dramatically advances the quality and efficiency of global authoring processes

Enterprise Software Customer Momentum

Global organisations are recognising the value of SDL’s continued investments in technology and services infrastructure. Significant contract wins include:
•Tweddle Litho’s selection of the SDL Knowledge-based Translation System for automotive owners and service documentation, which has already successfully been deployed for DaimlerChrysler
• Over 20 new installations of SDL Translation Management System, including Hasbro, Le Meridien, Linde, Philips DAP, Plantronics, Qualcomm, Regus, Sony and Texas Instruments
• Early adoption of SDL AuthorAssistant from Kodak, Siebel and Getty Images

Services Infrastructure

We have continued our progressive 2 year investment program to align network office infrastructure and low cost centre hubs, increasing customer value and adding to profitability. The value of our worldwide office infrastructure has become more significant as technology automates more of the translation process and the focus will move towards network office resourcing, whilst the process is managed by technology. To this end, in April 2005 we acquired Lingua Franca, to form a Middle Eastern hub. SDL now has 50 offices in 30 countries, providing extensive local language coverage for our customers.

TRADOS acquisition

With 90% of global businesses only partially translating their global content due to the complexity and effort it takes to translate and maintain, there is considerable lost opportunity in global markets. The acquisition of TRADOS in early July 2005 confirms SDL’s position as the leader in providing multilingual technology into the market. The enlarged group allows us to provide technology and infrastructure to enable effective Global Information Management (GIM) of companies’ assets within the GIM ecosystem.

The integration of TRADOS and SDL has progressed ahead of schedule, allowing us to start focussing on our advanced new technology platform to manage multilingual content. We are able to take the best of both companies technology and provide a solid framework for our customers. We are aligning the products in both companies to provide a fully integrated suite of products from the desktop to the enterprise. This ecosystem of technology modules enables our customers to build up their own technology ecosystem knowing they can fully integrate the technology modules to provide customised solutions for their specific requirements.

Vision and strategy for Global Information Management

SDL’s investments and acquisitions over the last 5 years have resulted in SDL owning the technology framework required to effectively manage translation process efficiently. This, combined with the offices infrastructure, positions SDL well to further execute its vision to maximise value for our customers and shareholders

The market has matured enormously in the past 18 months, we now have over 100,000 desktop translation products in the market and our enterprise software has reached 100 installations. The larger Language Service Providers are adopting server based Translation Management to leverage their translation solutions and the corporate market for enterprise technology is moving from early adoption to that of market maturity. There is now a very clear technology standard in the market place. Freelancers and smaller agencies are able to adopt the desktop technology with the comfort that they are able to integrate with the enterprise technology of their corporate clients, creating a smooth ecosystem allowing upward compatibility and upgrade opportunity at considerably less cost than has been afforded in the past. We consider this technology ecosystem will be the catalyst for considerable market growth.

Financial Summary

For the first half of 2005 operating profit before amortisation of intangible assets has increased by 71% to £3.4 million (H1 2004: £2.0 million).  Revenues were up 11% at £34.1 million (H1 2004: £30.7 million) and the Group’s cash and cash equivalents at 30 June 2005 were up 67% to £12.9 million (H1 2004: £7.8 million).

Outlook

We are continuing to see the benefits of our long-term investments in both the local geographic infrastructure and software solutions, which we anticipate will maintain the trend of strong revenue growth and increased profit contribution for the Group. We believe our technology investments and acquisitions now position SDL as the leader in delivering multilingual enterprise software solutions to the content management market. In the latter months of 2005 we expect to complete the resource and systems integration of Trados. We also expect to see continued closure on some of the large strategic opportunities, coupled with a continued increase in standalone software solutions sales. As a result of the combined research and development organisations we will launch a new technology platform, comprised of integrated software modules allowing our customers to build their own technology ecosystem. We expect to see the revenue and profit contribution of software licenses continue to increase for the Group, leading to a healthy licence and service revenue mix.

As we move into next year we expect 2006 to be a positive year for SDL as our investments in software solutions and infrastructure continue to generate significant competitive advantages in the market by reducing costs and providing more effective tailored solutions to the customer. We will review minor strategic acquisitions activity for geographical leverage and potential technology in fills.

Mark Lancaster
Chairman and CEO SDL plc

For further information please contact:

SDL plc              On 14 September 2005 tel: 020 7831 3113
                            Thereafter tel: 01628 410 127
Mark Lancaster, Chief Executive 
 
Financial Dynamics                                  Tel: 020 7831 3113
Edward Bridges/Juliet Clarke 

Background information