Full-year profits for language software and digital information management specialist SDL (SDL) were held back by a combination of higher costs and poor economic conditions in key markets. The market had largely expected this, but the shock came from a revised figure for additional marketing and research and development costs this year of up to £9m that was more than twice the estimate of only a few months ago. Taken together, this suggests SDL had been skimping on investment in key parts of its business. In addition, a definite return from the extra outlay is uncertain as it partly relates to untried markets such as social media, so it is unsurprising that investors took the opportunity to dump the shares, which plunged 12 per cent after the results were released.
Operationally, SDL's language services division lifted underlying sales by 12.4 per cent to £151m, although operating profits fell 9 per cent to £23.2m as margins fell sharply because after a review management decided to take a more cautious stance on the booking of revenues generated by long-term service contracts. There was weaker trading in SDL's content management segment, too, where the boost from the Alterian acquisition was more than offset by softer income from licensing, which meant divisional underlying revenues were 2.7 per cent lower.
Broker Investec Securities slashed its current year pre-tax and EPS forecasts by 24 per cent to £30.9m and 29.3p respectively (from £35.5m and 33.8p in 2012).
SDL (SDL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 440p | MARKET VALUE: | £353m | |
| TOUCH: | 438-440p | 12-MONTH HIGH: | 755p | LOW: 424p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 284p* | NET CASH: | £6.3m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 159 | 19.9 | 19.2 | nil |
| 2009 | 172 | 24.0 | 23.6 | nil |
| 2010 | 204 | 28.8 | 28.4 | 5.50 |
| 2011 | 229 | 33.8 | 32.7 | 5.80 |
| 2012 | 269 | 27.4 | 26.1 | 6.10 |
| % change | +17 | -19 | -20 | +5 |
Ex-div: 15 May Payment: 14 Jun *Includes intangible assets of £235m, or 292p a share | ||||
