Corporate jargon must be easier to digest if you are a language specialist. At least that would explain why SDL’s (SDL) management has insisted on referring to its new strategy as a “root and branch transformation”. This overworked metaphor may be appropriate given the strategy seems to be bearing fruit at last. Pro-forma revenues – which include currency tailwinds but have been adjusted to reflect last year’s acquisition – rose 6 per cent in the six months to June 2019. Citi analysts have estimated a 2-3 per cent currency tailwind, suggesting like-for-like revenue growth slightly ahead of last year.
Most of the top-line growth came from SDL’s language services division, where revenue was up 40 per cent to £128m. Margins in the division also improved as the company made better use of low-cost machine translation and increased its exposure to specialist translation services in regulated areas including finance and healthcare.
But at 42 per cent, the language services gross margin still lags the 78 per cent gross margin reported in the language technologies division, where revenues rose 7 per cent to £26m. Here, the group is developing a ‘language cloud’ – its next-generation language services platform which Peel Hunt has boldly compared to Microsoft’s Windows software, “the operating system the world runs on”. For now, investors will have to be content with adjusted EPS of 27.7p in the year to December 2019 (24.1p in 2018), rising to 30.6p in the following year.
| SDL (SDL) | ||||
| ORD PRICE: | 493p | MARKET VALUE: | £447m | |
| TOUCH: | 484-493p | 12-MONTH HIGH: | 601p | 430p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 26 | |
| NET ASSET VALUE: | 273p* | NET CASH: | £1.1m** | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 143 | 7.8 | 6.8 | nil |
| 2019 | 183 | 10.9 | 8.9 | nil |
| % change | +28 | +40 | +31 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £222m, or 244p a share. **Excludes lease liabilities of £20.4m | ||||
