SDL's (SDL) full-year performance was disappointing, although not unexpected. In December, shares in the language translation technology specialist plummeted as it flagged issues that might dampen profits. Accordingly, some software deals did not close before the year-end, while revenues were constrained due to a faster-than-expected shift towards software-as-a-service (SaaS) sales, away from perpetual licences. Moreover, the language services division – comprising 64 per cent of sales – suffered from gross margin pressure in the first half, as it took on one-off costs to meet increased demand.
That said, SDL is part way through a multi-year transformation programme; these results reflect one leg of a longer journey. Given the specialised nature of SDL's offering, its ability to rationalise operations is limited, but it did manage to reduce headcount and costs in specific areas of the business as the year progressed. Meanwhile, language services margins recovered in the second half: revenues here climbed 11.4 per cent to £185m, and the group “took action” on specific customer contracts. A £5.9m investment in the automation programme ‘Helix’ could inspire further margin gains this year.
Analysts at Investec forecast pre-tax profit of £26.3m and EPS of 23.5p for the year to December 2018, up from £22m and 18.8p in 2017.
| SDL (SDL) | ||||
| ORD PRICE: | 406p | MARKET VALUE: | £334m | |
| TOUCH: | 406-410p | 12-MONTH HIGH: | 675p | LOW: 333p |
| DIVIDEND YIELD: | 1.5% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 230p* | NET CASH: | £22.7m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 266 | -24.4 | -34.8 | nil |
| 2014 | 260 | 9.4 | 8.0 | 2.5 |
| 2015 | 267 | -25.2 | -37.9 | 3.1 |
| 2016 | 290 | -15.8 | -22.3 | 6.2 |
| 2017 | 288 | 29.9 | 34.8 | 6.2 |
| % change | -1 | - | - | - |
| Ex-div: | tbc | |||
| Payment: | tbc | |||
| *Includes intangible assets of £153m, or 186p a share | ||||
