SDL moots maiden dividend

SDL, the translation software company, said it was considering paying a maiden dividend as its cash reserves mounted in spite of the economic climate.

"We would have paid a dividend this year, but we were not sure what was going to happen in these uncertain . . . times. We thought it would be better to hold on to the cash," said Mark Lancaster, chairman and chief executive. But he added a dividend could be paid as early as next year.

SDL provides technology and services to help clients such as Hewlett-Packard, Microsoft and Sony translate product information, websites and other corporate information into dozens of languages.

Pre-tax profits rose 29 per cent to £11.8m in the first half of 2009, while revenue rose 10 per cent to £83.3m, helped by currency changes. Cash reserves doubled to £32.9m.

The company, which entered the FTSE 250 this year, averaged about 20 per cent revenue growth a year before the downturn. Mr Lancaster said some business had fallen away as big customers cut back on projects. But certain areas of the business - such as tools that help companies manage and translate their websites - were expanding, he said. The company is also winning more business from big clients such as GE.

"This is a down year, but we are quite stable, and 2010 will be a lot stronger," Mr Lancaster said.

Earnings per share rose 28 per cent to 10.98p. The shares, which have climbed 18 per cent in the past six months, fell 26.6p to 340p.

* FT Comment

SDL cannot escape the downturn, but is coping as well as can be expected by keeping a tight rein on costs. Doubling cash reserves in this economic climate - in spite of a £9m acquisition in June - is impressive and speaks volumes about the group's potential. As companies become more global, the need for translation technology will only keep rising. Once growth returns to the global economy, the company's prospects are strong. But for now, on an estimated 2009 price/earnings ratio of 12 times, SDL is valued in line with the better-quality technology stocks and there is no immediate catalyst for an increase.

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