SDL profits jump, CEO sees hope with outsourcing during downturn

Courtesy: http://www.forbes.com/

British technology group SDL Plc exceeded market expectations on Tuesday with a 49 percent jump in 2008 pretax profit and its CEO said it would benefit from new outsourcing deals during the economic downturn.

Chief Executive Mark Lancaster said the group would be partly shielded from recession by steady income from its translation services -- which provide about 67 percent of its revenue -- as more companies turn to outsourcing to cut costs.

'We will continue to see companies in 2009 outsourcing the whole (translation) problem -- it's a nice problem for us. More businesses will move the whole outsourcing to us,' he said.

SDL, which provides software services to Microsoft, posted profits before tax and amortization of 25.6 million pounds ($37.3 million) in 2008, beating a consensus forecast of 25 million pounds.

SDL reported a strong net cash position of 31.2 million pounds at the end of 2008 and said it had seen growth across both its technology and services segments, aided by its acquisition of US translation company Idiom in Feb. 2008.

'That (acquisition) gave us technology growth of 59 percent,' Lancaster said in an interview. 'We have quite an ownership of the supply chain now.'

The group, which also develops multilingual technology for Dell, HP, and Philips, said revenue grew 35 percent to 158.8 million pounds in 2008 but warned that cost-cutting among its clients could hit growth in 2009.

'With the continued deterioration of the worldwide economic climate, 2009 may well be a challenging year,' he said.

'I'm not going to tell the analyst we'll get 35 percent growth this year; it will be less than that ... What we're seeing is delays (on orders) of 2-3 months, but they are still buying,' he added.

The UK-based company, which does most of its business in the United States and Europe, has seen a 'strong positive' impact from currency movements, as sterling has weakened against the euro and dollar.

'Only seven percent of our business is in the UK so at the moment (currency) is actually super for us,' he said.

SDL recently expanded its business, buying Idiom for 13.6 million pounds, and paying 36 million pounds for Amsterdam-based Tridion, a web management business, in May 2007. Lancaster said future acquisitions were possible.

'I'm not saying we are going to acquire something tomorrow because we're not,' Lancaster said. 'But there is a lot of potential in e-commerce and multimedia -- all of those things we can either acquire or build ourselves.'

Shares in SDL, which have gained 10.6 percent since the start of 2009, fell to 245 pence in mid-morning trade on Tuesday, reversing earlier gains.