Content management and translation software supplier SDL (SDL) reported calendar 2019 results in line with expectations, with progress across all divisions and key performance indicators.
But perhaps more importantly, the company has seen little impact on its ability to serve its enterprise and public organisation customers and, as yet, has not taken a material hit to revenue.
Shares in the business rallied nearly 9% on Tuesday, hitting 460p, the stock’s highest level since market awareness of the coronavirus threat really kicked in.
SOLID NUMBERS
The results showed 2019 revenue up 16% to £376m, or 5% pro-forma including a full-year contribution from DLS, the high tech language services business serving the financial services, life sciences, legal and marketing industries it bought for $77.5m (£60.1m) in July 2018.
Profitability grew ahead of the top-line, with adjusted earnings before interest and tax up 28% to £37.2m.
As highlighted last month, SDL’s near-term prospects have been unsurprisingly muddied by the coronavirus, especially since more than a quarter of revenue is believed to come from the hard hit retail, travel, auto and manufacturing sectors.
That forced the company to pull previous 2020 guidance and push the button on a number of cost and cash savings measures.
NAVIGATING THE NEAR-TERM
‘SDL has modelled a number of scenarios as part of its stress test and remain confident it has the resources and mitigation plans in place to weather 2020,’ said analyst at Numis today.
They believe that strategic investments made in systems, automation, product innovation and account management should ‘allow the group to strengthen its competitive position,’ in the medium term.
In the meantime, analysts remain split on what to expect this year. For example, pre-tax profit is pitched anywhere from £37.2m, at the high end, to £17.1m of the three brokers to update today. That makes valuing the shares incredibly difficult.
FINANCIAL PROP
‘The board’s severe but plausible scenario sees revenue decline by 20% for a period of six months,’ said Peel Hunt, for a 10% annualised fall or 7%, if growth comes through as anticipated in the latter half of the next year.
‘Even in its more severe downturn scenario, the board believes it can operate with the existing revolving credit facility it has in place.’
SDL has tapped £70m of a five-year £120m revolving credit facility, which expires in July 2023.
