Broker Peel Hunt has made a massive U-turn on 2020 forecasts for language translation service business SDL (SDL) after the firm’s impressively robust half-year performance.

‘In the eye of the Covid-19 storm, we cut our numbers to reflect the uncertainty that laid ahead,’ said analyst James Lockyer. ‘Today, we are increasing them given SDL’s performance to date and the positive momentum it is seeing into the second half.’


SDL’s revenues during the first half to 30 June were nowhere near as badly affected as anticipated by the pandemic, dipping just 1% (2% at constant currencies) to £181 million.

Meanwhile, prior technology investments drove gross margins from 51.5% to 52.2%, and with some disciplined cost control measures put in place, it meant adjusted operating profit rose from £16.1 million to £16.3 million.

Shares in the company jumped almost 17% to a post-Covid high of 545p.


SDL’s ‘severe but plausible’ scenario had anticipated a 20% drop in revenue this year. Peel Hunt estimated that things would be better than that, forecasting a 9% decline, but feeding through to a 24% slump in adjusted operating profit to £30.7 million.

Forget that, is effectively what Peel Hunt’s Lockyer and colleagues said today.

Their calculations now suggest that SDL’s full year 2020 revenue will decline by less than £2 million on last year’s £376.3 million. Adjusted operating profit this year is now estimated at £33.8 million, versus the £37.2 million in 2019.

Today’s about-face by Peel Hunt is a very good illustration of just how difficult it has been for company executives and analysts to make sensible forecasts about trading performance during the coronavirus crisis.

The stock is ‘highly undervalued,’ said the Peel Hunt team.


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Issue Date: 11 Aug 2020