Shares digital

SDL (SDL) – Finals PTP: £12.7m (£9.4m) Divi: n/a (n/a)

A fifth acquisition since 2005 has only just closed, but if Idiom proves as successful as previous buys TRADOS and Tridion then shareholders will continue to speak highly of the translation and content management software and services expert.

SDL snapped up the US-based competitor last month in a deal worth £13.6 million, including the target’s debts. ‘Idiom is not dissimilar to TRADOS, in that it has been investing heavily in global information management (GIM),’ says SDL’s chief executive Mark Lancaster, who believes the currently loss-making purchase will prove earnings accretive by 2009.

‘TRADOS was acquired in 2005 and it was a tough deal,’ Lancaster continues. ‘It was losing lots of money but we are pleased with the integration and we are now seeing significant returns there.’

Web content management expert Tridion, purchased for £47 million in 2007, has also settled in well and neatly supplemented 8% organic sales growth last year. The shares in SDL have fallen from a 12-month high of 431p to 274.75p even though the Berkshire firm yet again beat consensus estimates.

‘I sold a few shares in September, which spooked some people, then came the credit crunch and the weaker dollar,’ explains Lancaster. ‘But the consensus analyst forecast was £115 million of sales and £15 million of profit [before tax and amortisation] and we did £117.4 million and £17 million.’

Another year of strong progress should quell any further concerns, and the chief executive believes his firm will be able to ride out any economic turbulence.

‘Financial services is less than 5% of our sales, so in that respect our exposure is pretty small. Services generate 70% of our sales and 87% of that is repeat business with large, ongoing clients, so we feel we are pretty well insulated,’ he concludes.

Shares says: The shares bounced from their lows and these numbers should mean they continue to rally.

by: Russ Mould