Broker snap: SDL still a 'buy' despite profit warnings, says Investec

18th Jun 2013 10:56

Investec has maintained its 'buy' stance for SDL despite a severe profit warning from the translation and communications software firm on Tuesday, saying that it expects the company's performance to improve next year.The FTSE 250-listed company said profit before tax (PBT) and amortisation for 2013 is now expected to be within the range £15-20m in 2013 compared to £35.5m in 2012.Investec analyst Julian Yates said: "While we indicated at the Q1 update that we felt forecast risks had risen, the impact is more severe than we expected and we reduce our FY13E PBT to £15.1m from £30.9m."He said that much of the surprise profit shortfall was in Language Services due to declining volumes in the first half which were not market-share driven. However, he said that the pipeline "importantly" suggests a pick-up in the second half.Meanwhile, continuing investments in the Technology divisions are also behind the broker's forecast reduction.Yates said: "The scale of the downgrade is disappointing. However the main driver is services, not the tech divisions which are seeing the increased sales and marketing spend. "We see services improving and the impact of the sales investment should drive a better FY14 in tech, so while the stock is likely to fall on the update, we stay at 'buy' with a 320p target price."The stock was down 33.23% at 258.08p by 10:55.