SDL warns on profit

Business, translation and communications software company SDL said it expects a profits shortfall, following a review of the firm, as its struggles against poor sales and marketing execution, as well as the tough economic environment.

"Management forecasts for the year are now considered to be too optimistic against market expectations," the group said in a company statement.

SDL expects a profit shortfall of between £3m to £4m against current market expectations for the financial year ending December 31st 2012.

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The board expects to report revenues of around £270m to £272m and profits before tax and amortisation of £36m to £37m for the year

SDL said the reduction came after taking a more cautious view of percentage-of-completion and cost-to-complete of certain services contracts in the second half of the financial year.

"This will result in a profit shortfall in the current financial year of approximately £2m in the language services division," SDL explained.

Chief Executive Officer Mark Lancaster, who temporarily took on the role following John Hunter's departure, said: "Alongside our CFO Matthew Knight, I have undertaken a review of the business and the revenue and profit forecasts. The financial effect is to reduce our profit by about £3m to £4m in the current year."

He added: "Despite the short term shortfalls in the business, I feel more confident in SDL's technology stack and service solutions than I have ever been. In 2013 we will make additional investments in sales and marketing to drive long-term growth. We expect this additional investment to be between £3million to £4 million in 2013."

Looking to 2014 and beyond, SDL said it expects to see sustained growth in its technology revenues and improved profit contribution.

CJ