Co-founder and chief executive Rudolf van Megen will step down by September, after 30 years at the helm of software tester SQS. He has guided the business onto what he believes is the right path for its future development, but is leaving before the transition is complete.
Mr van Megen's objective is to grow SQS's managed services business to 40 per cent of total revenue by 2014, while maintaining the contributions from its testing and consulting offerings. Last year, managed services contributed 22 per cent of revenue in 2011, up for 11 per cent in 2010, with orders of over €66.5m (£55.4m) and an average contract length of two-and-a-half years.
However, growth here has come at a price. Costs are higher early on in contracts, before the bulk of the work can be moved to cheaper overseas testing centres. There was also the up-front expense of a cost-reduction programme, and an additional €2m provision relating to two poorly-priced early contracts.
Management believes these will be the last one-off costs to hit managed services and that the rationalisation programme will save €3m a year going forward. Meanwhile, the proportion of fee-earning staff employed in overseas test centres increased three percentage points to 42 per cent - SQS aims to increase that to 60-65 per cent by 2014, with further cost savings to come.
Collins Stewart expects adjusted pre-tax profit of €10.1m for 2012, giving adjusted EPS of 25¢.
| SQS SOFTWARE QUALITY SYSTEMS (SQS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 167p | MARKET VALUE: | £46.6m | |
| TOUCH: | 165-169p | 12-MONTH HIGH: | 246p | LOW: 143p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 247¢* | NET DEBT: | 14% | |
| Year to 31 Dec | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2007 | 121 | 9.67 | 35.0 | 20.0 |
| 2008 | 143 | 10.8 | 30.0 | 11.0 |
| 2009 | 134 | 4.90 | 14.0 | 7.00 |
| 2010 | 163 | 6.44 | 18.0 | 8.00 |
| 2011 | 189 | 5.62 | 15.0 | 5.00 |
| % change | +16 | -13 | -17 | -38 |
Ex-div:23 May Payment:31 May *Includes intangible assets of €58m, or 208¢ a share £1=€1.20 | ||||
