SDL.L Regulatory News (SDL)

SDL plc

Trading Update

15 December 2017, Maidenhead, U.K. - SDL plc ("SDL" or "the Group"), a leader in global content management and language translation software and services, is providing an update on the trading performance for year ending 31 December 2017.

SDL's sales pipeline for the period is in line with expectations. However, the Group is reliant on the closure of certain software deals, which may not be processed and fully awarded by 31 December 2017. If these deals are not closed, Adjusted EBITA1 for 2017 on a like-for-like2 basis will be below current market expectations. The Group has also experienced a faster than forecast shift from perpetual licence sales to Software-as-a-Service (SaaS) sales. This has resulted in higher costs recognised in the year, with revenues deferred into future years.

In Language Services, SDL is pleased to report continued revenue growth and a recovery in gross margins, as expected. The Group has fully addressed the margin pressure and the two challenging contracts in Asia reported in the first half results. Our Language Services automation programme, 'Helix', is on track and set to deliver further gross margin gains during 2018. 

Our Language Technologies division has delivered good licence wins. In October, the Group also announced a number of upcoming product launches in the segments of content management ('Tridion DX') and AI-assisted content creation, to positive market response.

Improved processes and greater automation, introduced as part of SDL's transformation, will enable the Group to rationalise parts of its global operating and organisational model during 2018. As a result, SDL has taken action to reduce parts of its cost base. The Group expects to recognise an exceptional charge in 2017 of approximately £3.5 million and a slightly lower charge in 2018, as we look to complete the optimisation of our operating model.

However, to capitalise on the growth opportunities in the market, the Group plans to increase investment overall, with a focus on developing our premium solutions in fast-growing verticals, such as Life Sciences and Marketing Solutions, and to accelerate the development of our cloud-based, AI-powered Content Globalisation platform. Some of the core features of this platform, such as Machine Learning, will be, we believe, disruptive and industry leading.

The nature of our technology investments, coupled with improvements to the Group's systems and processes now require us to capitalise a small portion of our annual development spend, which has risen in the year. In 2017, the Group expects R&D capitalisation to be £2 million to £3 million, amortised over 3-4 years. For clarity, the positive benefit of this capitalisation is excluded from our commentary on the like-for-like Adjusted EBITA above.

The outlook for our industry remains very positive and, with the right level of investment, the Group believes it can move to the forefront of its industry. SDL remains committed to delivering double digit revenue growth and mid to high teens profit margins over the medium to long term.

1 Adjusted EBITA = Earnings Before Interest, Tax and Amortisation of Acquired Intangibles and Exceptional Items

2 Like-for-like basis = capitalised R&D in the period treated as an expense

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About SDL

SDL (LSE:SDL) is the global innovator in language translation technology, services and content management. Over the past 25 years we've helped companies deliver transformative business results by enabling powerful, nuanced digital experiences with customers around the world. Are you in the know? Find out why 78 out of the top 100 global brands work with us at SDL.com and follow us on Twitter, LinkedIn and Facebook.