H1 results were never going to be pretty at SDL given the warning issued in June (see here) and heavy investment and restructuring but at least there were no more surprises and performance was in line with revised expectations. And one of the bright spots was that the UK performed comparatively well, with a 1% rise in revenue as part of 4% headline growth in Continental Europe, where all other regions delivered negative growth.
Revenue for the six months to June 30 was down c2% to £131m but profits took the brunt of the punishment, plummeting from a pre tax profit of £16.4m to a loss of £2.3m as a result of reduced sales, legacy sales and marketing issues, investments and one-off litigation costs. The company is still in transformation but the expected benefits are taking longer to come through than expected. Revenue was down in all segments, but Language Technologies and Campaign Management, Analytics and Social Intelligence fared worst with a 9% and 15.3% drop respectively.
Hopes are still pinned on H2 but the company has a lot of ground to recover. However, there is evidence of strong capital management as cash generation was up by £2.5m to £9.5m. Capital expenditure was up to £5.1m (vs. £4.2m) due to investment in SaaS cloud infrastructure but this is necessary spend, along with the much needed additional investment in products. With a series of releases for its core technology platform during the reporting period, SDL is making progress and with its pipeline improving. Hopefully it will be getting closer to reaping revenue and profit benefits but it still looks like it has a long haul ahead.