Investment Column: SDL shares are a winner in any language

WSP Group; Goals Soccer Centres
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The Independent Online

Our view: Buy

Share price: 463p (+9p)

Extraordinaire! Sehr gut! Excelente! Mumtaz! Whichever language you choose, yesterday's full-year results from the translation software group SDL were pretty impressive.

The company said that pre-tax profits jumped by 21 per cent to a touch over £24m, helped by contracts with a host of new customers, including Continental Airlines and the UN.

For investors, news that a dividend is on its way, albeit giving a yield of just 1 per cent, should be cheered, as should the chief executive Mark Lancaster's assessment that he is "bullish" about the year ahead.

What was perhaps not communicated quite so well by the group was that 2009 revenues fell by 8 per cent, on a constant currency basis. Nonetheless, there was plenty of good news and plenty of support among the analysts who advised investors to form an orderly queue to buy the stock.

Those at Piper Jaffray argued that "SDL's Global Information Management vision continues to gather momentum and these strong 2009 results are an early sign that SDL will, as expected, be a key beneficiary of an improving macro environment. We retain our overweight rating, and deferred cashflow-based target of 505p ... The confirmation of a first dividend for 2010 is another positive for the stock."

Whether investors speak Japanese or double-Dutch, there are few reasons not to buy the shares. The stock has put on an impressive 57 per cent in the last 12 months, and even though yesterday's feeble gains indicate that much of the good news is already priced into the shares, we would expect a jump from the stock in the coming months as conditions improve.

There seem to be few risks beyond the macroeconomic climate, which can affect any company. Buy.

WSP Group

Our view: Hold

Share price: 280p (+14p)

Given the economic troubles of the past year, WSP's preliminary results for 2009, published yesterday, are not as bad as they seem.

The figures from the engineering consultancy do not make comfortable reading. Revenues dropped by 10 per cent to £723m, operating profits were down by 27 per cent at £41.3m and pre-tax profits dropped by a dizzying 51 per cent to £25.4m.

But there were unavoidable external factors that do provide some justification. One such is the meltdown in Dubai, which forced WSP to slash its head count in the region by 40 per cent and left it with not only a trading loss, but also a full provision against further monies due. But it is notable that the group only added £3.4m in debt, taking the total to £59.6m.

The company's chairman, David Turner, tried to sound upbeat. "I am pleased to report a trading performance in 2009 that met our expectations in what has been a particularly testing year," he said. "As we move into 2010 we believe our business is appropriately positioned for current market conditions following timely restructuring, and it remains well balanced between the public and private sectors in our different regions."

The big worry is the public sector. The company notes that its European operations are "heavily weighted" to the public sector, and makes particular reference to the contribution of a strong performance from public sector business in the UK in 2009.

Mr Turner says that in northern Europe, particularly Sweden, public expenditure looks to be protected. We do not disagree outright. But, given the uncertainty about the UK's finances in the run-up to the general election, we remain cautious. Hold.

Goals Soccer Centres

Our view: Buy

Share price: 150p (+7p)

Football's popularity rarely wanes. And with one of the closest title run-ins for years, the pantomime of players' off-field activities and the forthcoming World Cup in South Africa, the "beautiful game" will be even harder to escape over the next few months.

One of the companies that benefits from the nation's love of footie is Goal Soccer Centres, which owns what it calls "next generation" five-a-side pitches around the country. It has 34 sites in the UK with plans for seven more this year and a further six in 2011.

It has over 100,000 people a week playing on its pitches and hopes to attract corporate customers back after a dip during the recession.

The World Cup should cause interest to spring up before and after the tournament (although this may depend on England's performance). Sales in 2009 were up 10 per cent to £26.2m, and weren't hit too badly by people staying home during the snow.

Management is confident for growth and on a price-to-earnings of 11 times revenues, it is worth a speculative dig. Buy.

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