SQS - which provides software testing services across a range of industries - issued a profits warning last May as clients suspended projects at short notice and utilisation rates plunged. The company cut its workforce as a result, reducing its cost base by an annualised €8.9m (£8.1m), which along with a strong recovery in spending in the second half helped salvage the profit outcome for the year.
Germany remains its largest market, and sales there dipped 7 per cent to €63.6m as a consequence the weak economy and a fall in demand from several manufacturing sectors. Business in the UK also suffered due to its high exposure to the banking sector. However, Switzerland did well due to a strong wealth management market, which pushed sales there up 32 per cent to €18.7m.
SQS signed up 160 new clients over the year, and also enjoyed some success with its push into managed services, which from a standing start now makes up 3 per cent of sales. And with 80 per cent of the €18bn software testing market served by in-house departments, SQS believes there is plenty of scope to make further inroads, especially in higher-growth market segments such as the public and utilities.
Broker Altium expects adjusted pre-tax profits of €8.8m and EPS of 26.5¢ in 2010.
SQS SOFTWARE QUALITY SYSTEMS (SQS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 215p | MARKET VALUE: | £58.6m | |
| TOUCH: | 210-220p | 12-MONTH HIGH: | 245p | LOW: 135p |
| DIVIDEND YIELD: | 3% | PE RATIO: | 34 | |
| NET ASSET VALUE: | 226¢* | NET CASH: | €1.6m | |
| Year to 31 Dec | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2005 | 55 | 3.71 | 21 | nil |
| 2006 | 79 | 5.07 | 28 | nil |
| 2007 | 121 | 9.67 | 35 | 20 |
| 2008 | 143 | 10.80 | 30 | 11 |
| 2009 | 134 | 4.90 | 14 | 7 |
| % change | -6 | -55 | -53 | -36 |
Ex-div: 19 May Payment: 27 May *Includes intangible assets of €58m, or 212¢ a share **Special two-year dividend £1=€1.1 | ||||
