Founded by Grant and Merryn Straker in 1999, Straker Translations Limited (ASX: STG) has established itself as a leading global technology-driven translation services platform. The Company has a range of ongoing growth initiatives including the integration of its platform into leading eCommerce and content management platforms and the growth of its enterprise sales and account management teams.
Acquisitions are an important part of the company’s growth strategy. In the last two years, the company has undertaken many acquisitions and it believes that there is a strong commercial rationale in migrating acquired company customers onto Straker’s technology platform.
Recently, the company made a significant step in expanding its operation in Europe region by acquiring a Spanish translation company On-Global Language Marketing S.L, as announced on Monday 17th June 2019. As per the announcement, the total Consideration for the acquisition is NZ$2.25 million paid up-front comprising of NZ$1.73 million in cash and NZ$520k in Straker shares. The acquisition was funded from the Company’s cash reserves and no capital raising was required to complete the transaction.
Despite the release of this news, the share price of STG witnessed down 0.326% during today’s trading session.
On-Global Language Marketing S.L. is a Spanish translation company, headquartered in Vitoria-Gasteiz in the Basque Country. The company operates in two regions that are among the most industrial and hi-tech areas in Europe.
To seek out targeted acquisitions that strategically complement and accelerate the company’s growth is a key part of the Straker Translations five-point growth strategy. The acquisition was completed on 14 June 2019 in Spain after all material conditions were fulfilled.
On-Global is a strategically compelling acquisition as it extends Straker’s presence in the Spanish market, a market Straker knows well. Further, this acquisition adds new strategic customers onto Straker’s high margin RAY technology platform and it also supports further operational synergies across Straker’s European operations. It is expected that this acquisition will add new revenue for the 12 months to 31 March 2019 and will also improve the company’s EBITDA.
Straker Translations Limited is currently in discussion with a number of other potential acquisitions in Europe, the USA and the Asia Pacific region to further expand its operations. Straker Translations Limited was listed on ASX in October 2018, following the completion of an IPO.
In FY19, Straker Translations performed strongly with revenue growth of 44% (YOY basis). The company’s revenue was NZ$24.6 million in FY19, up 4.7% on Prospectus forecast, reflecting organic growth from enterprise customers in EMEA and APAC, and from partial year earnings from acquisitions completed in FY19.
The company’s new customer revenue increased by 14.2% year-on-year, and repeat revenue from the Company’s existing customer base grew by 53.3% in FY19. Operating cash outflow for the year was ahead of the Company’s Prospectus forecast at NZ$(1.07) million.
The Company believes that it is in a strong position to deliver on its M&A strategy and support organic growth, with NZ$17.7 million cash at bank and no debt at 31 March 2019 other than the deferred and contingent consideration in respect of acquisitions.
During the year, the company’s basic earnings per share improved by 82% from a loss of 59.43 cents per share to a loss of 10.95 cents per share. Along with this, the company’s diluted earnings per share also improved by 79% from a loss of 37.06 cents per share to a loss of 7.87 cents per share.
Statutory Results Summary (Source: Company reports)
The company operates in the language services industry which has grown from US$38 billion in 2015 to US$43 billion in 2017 and is forecast to grow to US$67 billion in 2022 at an approximate CAGR of over 9% per annum (pa). The growth in the industry is driven by an increasing need for companies to localise content across diverse linguistic markets together with a rapid increase in the production of online and offline content. The company believes that it is well placed to take advantage of this growth by virtue of its leading translation technology platform and the scalability of its business model.
The company believes that acquisitions are a significant growth opportunity given the highly fragmented nature of the language services industry and intends to actively pursue potential acquisition opportunities in the market in the future.
On the stock performance front, since its listing on ASX, the stock of STG has provided a return of -10.23%. In the last three months, the company’s share price increased by 13.70% as on 14th June 2019. At the market close on 17th June 2019, STG’s stock traded at $1.530 with a market capitalization of circa $80.74 million. As per the ASX, the company has 52 weeks high price of $1.910, and 52 weeks low price of $1.170 with an average volume of ~ 67,612.
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