GCI Portfolio Update: SDL

Ticker: SDL • Sector: Support Services • Market cap: £440m • Share price: 482p • Buy

 SDL translation and software

The translation services and software company is working through a self-improvement programme to raise its margins and growth rate. A key element of this is to raise exposure to ‘premium services’, which is the value-added work carried out for regulated sectors like life sciences and financial services. This is now up to 38% of revenues from 29%, having been boosted by the acquisition of DLS last year. Margins should also improve as more work is insourced to raise the utilisation rates of translation staff and reduce fees paid to freelancers. Efficiency is also being helped by 90% of clients moving on to the company’s Helix platform which manages workflow, tracking the progress of jobs and enabling work to be shared across the network. CEO Adolfo Hernandez described Helix as a “lifesaver” in the current remote working environment.

So far there has been no impact on SDL’s ability to service its clients and it is too early to gauge any revenue impact. The company has suspended dividend payments and initiated an initial £8m cost saving programme. Broker forecasts reflect a 2008-9 style 10% reduction in revenues which puts the stock on 23x 2020 earnings, followed by a recovery next year to a p/e of 15.4x. In April the company had net cash of 35m and over £50m of undrawn facilities

Comments (0)