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SDL shows language skills

Strength in SDL's language services division was offset by a weaker technology performance
August 5, 2015

Mounting global competition has prompted more and more companies to differentiate themselves by offering localised websites and customer service across myriad devices and media channels. That helped SDL (SDL) - which provides social, e-commerce, language and other 'customer experience management' tools to the likes of Canon - post a 38 per cent rise in half-year adjusted operating profit to £9.4m.

IC TIP: Hold at 386p

Strong demand in the Americas and new clients such as Huawei and Mitsubishi Electric drove language services revenue up 4 per cent. Moreover, the division's pre-tax profit margin widened by 5.6 percentage points to a record 21.6 per cent. That reflected tight cost control, including greater use of automated translation technology and low-cost production centres.

However, tepid sales of customer experience management solutions meant the technology division's adjusted pre-tax loss widened by 44 per cent to £7.2m. Constant-currency bookings also fell 6 per cent as the restructured sales force geared up. But management expects adjustments to its sales teams and marketing tactics, together with a bulging business pipeline, to drive growth in the second half. Improvements to its real-time machine translation technology and the launch of a 'digital experience accelerator' - which allows clients to deploy websites in hours rather than days - have also bolstered the group's prospects.

Broker N+1 Singer expects pre-tax profit of £22m, giving EPS of 19.3p, up from £16.5m and 15.1p in 2014.

SDL (SDL)
ORD PRICE:386pMARKET VALUE:£313m
TOUCH:386-387p12-MONTH HIGH:472pLOW: 308p
DIVIDEND YIELD:0.6%PE RATIO:37
NET ASSET VALUE:240p*NET CASH:£8.2m

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141293.12.3nil
20151346.04.8nil
% change+4+94+107-

*Includes intangible assets of £194m, or 240p a share