1 year ago
August 24, 2020
And the best-performing listed LSP so far in 2020 is…
Now that most stock-market-listed language service providers (LSPs) are done reporting earnings for the first half of 2020, it is time to check on how investors in language industry companies fared so far this year.
The macroeconomic picture looks gloomy. The International Monetary Fund (IMF) updated its April 2020 World Economic Outlook report in June 2020 to project global growth for the year at -4.9%, 1.9 percentage points below its April forecast — and probably the worst reading since World War II.
The stock market, meanwhile, appears to have disconnected from the real economy; and, driven by large technology companies, many benchmark indices now trade at or at-near-record highs. (The disconnect and its causes are being widely covered in the financial press.)
The performance of the nine listed language services and technology providers that Slator tracks roughly mirrored the S&P 500’s plunge between February and March, but recovery has been uneven across LSPs.
Thus far, Australia-based language data company Appen and London-listed media localizer Keywords Studios — both of which might technically be considered adjacent to the core translation and localization industry — have emerged as clear outperformers.
Since Appen gave an update in April on its 2020 outlook, the company has continued to ride the data-annotation wave. Remote work was already the status quo for its estimated one million crowd workers. The company also predicted that “a pandemic-led increase in the use of search, social media and e-commerce platforms” and “an increase in available crowd workers” would boost performance — factors which also seem to have benefited other LSPs that have entered the space, such as Summa Linguae. We will know more by August 27, when Appen becomes the final provider on the list to report first half earnings.
In the core translation space, RWS leads the pack by a considerable margin, with shares up (yes, up!) more than 20% so far in 2020. So, despite already having been the most valuable core LSP prior to Covid, RWS again outperformed rivals and its benchmark year-to-date 2020. The company actually just hit an all-time high and is now worth an impressive GBP 2.05bn (USD 2.7bn), despite a slight decline in revenues and profits in H1 2020.
Looking ahead, RWS is betting on machine translation as a managed service (and internal productivity tool), as evidenced by the up-to-USD-20m it paid for its June 2020 acquisition of Iconic Translation Machines.
RWS said the future financial impact of Covid-19 remains “difficult to predict with accuracy,” but the company has seen “increased activity from Moravia’s large technology clients and Life Sciences’ clients, who are working on vaccines and antibody testing.” For now, investors like RWS’ strong exposure to big tech, steady-as-she-goes growth, and consistent dividends.
Shares in Super Agency SDL recovered after underperforming in the first half of 2020, jumping nearly 20% after the company posted results on August 11, 2020. In response to SDL’s “positive momentum,” which included closing H1 2020 with GBP 35m in cash with no debt, brokers Numis, N+1 Singer, Investec, and Peel Hunt all upgraded their full-year forecasts and now rate SDL a “buy.”
A key part of the company’s growth came from dubbing; between April and June 2020, ZOO reportedly processed dubbing volumes worth more than triple the value of dubbing projects run during the same period in 2019.
The pandemic has ramped up demand for the media localization provider’s services, and ZOO’s cloud dubbing platform, ZOOdubs, has emerged as an attractive alternative to brick-and-mortar studios shuttered during lockdowns. Since mid-July 2020, however, ZOO’s performance has faltered, as investors have begun to price in the full fallout of Hollywood’s struggle to resume TV and film production.
By April 2020, when Straker released its unaudited financial results for Q4 2020 (SlatorPro), Covid-19 had led the company to pause its aggressive M&A strategy of acquiring boutique LSPs.
Straker also saw revenues from enterprise customers drop “as key customers deferred product launches and commercial activity reduced generally.” During Q1 2021 (April–June 2020), Staker reduced the company headcount by 15%.
Honyaku was hurting even before the pandemic, with overall sales falling 3.8% year on year for FY 2020 (April 2019–March 2020) due to a dip in Translation Business revenues.
Covid-19 and “sharp increase in cancellations accompanying the spread of viral infections” pummeled the company’s Interpreter Business (down 95.5%), and just about eliminated its Convention Business (down 96.5%) in Q2 2021. Honyaku saw revenues fall 20.1% and shares drop 50% from their highs in early 2020.