Language Services boosts SDL’s Half-Year Results

SDL reported a 4% top line increase, pushing group revenues to £133.9 million for the first half of 2015. Profit came in at £9.3 million, a strong 39% increase from last year.

In terms of segments, Language Services and Technology’s revenue grew at a modest 4% and 3% respectively. On the bottom line though, Language Services posted a strong £16.5 million profit. This was driven in part by a more than two percentage point increase in gross margin, which reached a notable 46.5%. By any measure, this is an impressive figure for a language service provider the size of SDL with its global footprint and fixed cost-base.

SDL also scored a number of client wins in the Language Services division across different industry verticals: the UK-based company signed contracts with PPD-owned Acurian (life sciences services), Israel-based chemical company ADAMA, Akamai (web infrastructure), as well as Shenzhen-based conglomerate Huawei and Japanese giant Mitsubishi Electric.

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On the other hand, SDL’s Technology division lost £7.2 million in the first six months. SDL attributes this to a slow sales push stating that they “delivered a disappointing new bookings number that we believe is primarily due to the time it is taking to bed in our new sales force.” More specifically with the Technology unit, SDL says that its Customer Experience Management (CXM) related products “have not performed to expectations.” But that does not mean that SDL is scaling back in the space. In fact, they are doubling down. As we see with other large LSPs, there is a general belief that global marketing represents a massive growth opportunity. SDL is convinced that “over the next five years the digital front office will become a huge investment area and a massive battleground for customers, partners, and the ecosystem.”

New clients for the Technology units include Abbott Laboratories (Life Sciences), Canon, DAF Trucks NV, RCM Technologies Inc, Royal Mint, and Tetrapak Group. SDL did not specify what technology solutions are provided to these clients.

SDL guides for a positive outlook for the rest of the year, pointing out strong momentum in Language Services and a return to growth for Technology for the full year. They guide operations for full-year operating profit growth to be in line with their expectations.

In short, SDL’s more traditional Language Services unit is performing very well. This gives management the freedom to be patient for their significant investment in its Customer Experience Management initiative to achieve traction.

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