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Profits aren't in SDL's lexicon

Despite hefty investments and restructuring initiatives, SDL has shown few signs of a turnaround
March 18, 2014

Shares in SDL (SDL) tumbled 7 per cent as the translation and web content management company failed to realise expected revenue gains after a period of heavy investment and restructuring. Its administrative expenses climbed 37 per cent to £170m, driving operating profits from £28m down to a loss of £24m.

IC TIP: Sell at 346p

SDL analyses online user data for companies such as Amazon and Microsoft, then offers them tools to improve their website experience, including translating their content into multiple languages. Although it signed up high-profile customers such as Acer and Adidas last year, underlying sales slumped across all three segments. That included a 9 per cent drop at its language technologies business, which sells translation software and consultancy services.

"Where we performed very badly was letting the market know what we've got," says founder and chief executive Mark Lancaster. And although SDL has largely finished restructuring and improved its sales team, he expects a lag before those efforts translate into profits.

SDL fared better in other areas. Sales at its language services division, which translates customers' content, ticked up last half after falling slightly in the first six months of 2013. The company also launched a cloud-based product suite this year, which could in time drive higher licensing sales.

Broker Investec Securities expects pre-tax profits of £15.4m this year, giving EPS of 13.3p, from £8.2m and 4.8p last year.

SDL (SDL)
ORD PRICE:346pMARKET VALUE:£278m
TOUCH:346-348p12-MONTH HIGH:473pLOW: 220p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:244*pNET DEBT:1%

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200917224.023.6nil
201020428.828.45.5
201122933.832.75.8
201226927.426.16.1
2013266-24.4-34.8nil
% change-1---

Ex-div: -

Payment: -

*Includes intangible assets of £209m, or 260p a share