If 2013 doesn't turn out to be SDL's (SDL) low point, shareholders are bang in trouble. A botched attempt at leadership succession led founder and the company's real boss, Mark Lancaster, to resume day-to-day control and he's been fighting fires ever since. A series of profit warnings last year (October the most recent) weren't helped by grim end markets but, if truth be told, SDL's struggles are self-inflicted.


That's all yesterday's news, the tone is now far more upbeat. The supplier of language translation technology and analytic services has revealed in a trading update that it will beat market expectations for the year to December 2013, sparking an 11.5% share price spike to 377p.


It has guided revenues in a range of £265.8 million to £266.3 million range, albeit down on 2012's £269.3 million, but ahead of the £262.1 million consensus. Pre-tax profits before one-off items should amount to a bit more than £8 million.

SDL - Comparison Line Chart (Rebased to first)

Investors seem to be getting a little too carried away considering that this performance beats twice lowered market expectations. There's going to be legal and restructuring costs to consider.


SDL reckons operating cashflow was 'very robust,' although extra capital expenditure and regular dividends mean 2012's £6 million net cash position will this time round feature a £2 million net debt hole. That's chicken feed for a company of SDL's size.


The much needed hefty restructuring appears finished and management is keen to point out that several lower-margin contracts taken on 18 months ago or so are being run down, which should aid profitability ahead.


Stockbroker Numis sees 'half a recovery priced in' but it is arguably N+1 Singer analysts which capture the underlying truth about SDL right now, billing 2014 as the 'time to execute.' We couldn't agree more, but will watch with interest to see if SDL can recapture its past 'quality company' status.

Issue Date: 21 Jan 2014