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SDL – “further update on the trading performance for the year” in-line, but what’s it ‘further to’ again?

By Steve Moore | Friday 12 January 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Content management and language translation software and services company SDL (SDL) “is providing a further update on the trading performance for the year ending 31 December 2017”. What’s this further to again? Ah, yep – a profit warning in December...

The company states that it “expects to deliver Adjusted EBITA for 2017 of approximately £22 million, after R&D capitalisation of c.£2.5 million. Group revenue is expected to be approximately £285 million… Exceptional costs in 2017 will be approximately £3.5m, primarily related to restructuring charges. Net cash was in excess of £22 million at 31 December 2017”.

These compare to £21.5 million of adjusted EBITA on revenue of £286.8 million and net cash of £17.5 million broker to the company N+1 Singer was previously forecasting. However, that was only after SDL’s December update – at the commencement of 2017 it was looking for adjusted EBITA of £30 million+, rising towards £34 million in the now current year. For the current year, it’s now £26.3 million forecast.

These follow software deals not closed by the year-end “in a number of cases”, with it added “the group continues to work with customers to sign these deals. Also as previously disclosed, SDL experienced a faster, market-driven shift to Software-as-a-Service sales in 2017 which impacted group revenues by approximately £1 million to £2 million”.

Hmmm, “continues to work with customers to sign these deals” is far from definitive and the delays and business model shift suggest caution. Although the shares are down from more than 650p reached in 2017 to a current circa 425p, they are not much below where they commenced 2017 and still capitalise the company at £350 million. Currently, they remain on the bargepole list.

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