Shares in SDL (SDL) registered a double-digit increase as the software group reported a 57 per cent jump in operating profit to £29.7m in 2019. It represented an encouraging performance against a deteriorating set of circumstances, with all three of its divisions – Language Services, Language Technologies and Content Technologies – delivering sales growth. Language Services, which accounts for over half of total group revenue, grew by just over a fifth. Meanwhile, cash flow from operations increased to £50.5m from £45.6m, representing an enviable cash conversion rate of 98 per cent.
Management noted that its top 10 customer accounts grew in size by by 30 per cent. They now represent 25 per cent of overall revenue, according to chief executive Adolfo Hernandez, who also revealed that only two of the group's top 50 clients are in travel and traditional retail, both of which have been hit hard by the outbreak.
SDL said that it had not seen a material impact on revenue in the first quarter of 2020, but anticipates a reduction in constant-currency revenues across its language services and technology businesses. It has therefore implemented a ‘phase 1’ cost reduction plan worth £8m.
Broker Peel Hunt forecasts adjusted pre-tax profits of £28.7m and EPS of 23.3p in 2020, rising to £37.2m and 30.2p in 2021.
| SDL (SDL) | ||||
| ORD PRICE: | 460p | MARKET VALUE: | £419m | |
| TOUCH: | 446-470p | 12-MONTH HIGH: | 640p | LOW: 367p |
| DIVIDEND YIELD: | na | PE RATIO: | 21 | |
| NET ASSET VALUE: | 277p* | NET CASH: | £26.3m** | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 267 | -25.2 | -37.9 | 3.1 |
| 2016 | 290 | -15.8 | -22.3 | 6.2 |
| 2017*** | 287 | 17.0 | 18.9 | 6.2 |
| 2018 | 323 | 18.4 | 17.2 | 7.0 |
| 2019 | 376 | 27.0 | 21.6 | nil |
| % change | +17 | +47 | +26 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £215.2m, or 236p a share **Excludes lease liabilities of £32m ***2017 figures have been restated to reflect adoption of new accounting rules IFRS 15 | ||||
