SDL tumbles as it warns over 2017 earnings

Shares in SDL tumbled on Friday after the software maker warned that its adjusted earnings for 2017 will be below current market expectations if some of its software deals don’t close by the end of this year.

The company said its sales pipeline for the period is in line with expectations, but it is reliant on the closure of certain software deals, which may not be processed and fully awarded by the end of the month. If this turns out to be the case, adjusted earnings before interest, tax and amortisation will fall short of market views.

SDL also said it has experienced a faster-than-forecast shift from perpetual licence sales to Software-as-a-Service (SaaS) sales, which has resulted in higher costs recognised in the year, with revenues deferred into future years.

Still, the company said the outlook for the industry “remains very positive” and it is committed to delivering double-digit revenue growth and mid to high teens profit margins over the medium to long term.

In addition, it plans to increase investment overall, with a focus on developing its premium solutions in fast-growing verticals, such as Life Sciences and Marketing Solutions, and to accelerate the development of its cloud-based, AI-powered Content Globalisation platform.

At 0945 GMT, the shares were down 25.5% to 342.50p.