Being an industrial software testing specialist in Germany during a period of significant export growth for the country has been good news for SQS - the Cologne-based company delivered robust organic growth in all of its key markets in the period. Add that to a second-half weighting for profits, as well as a move into the managed services arena, and the shares look too cheap.
SQS's core markets in Central Europe and the Middle East delivered the best performance after benefiting from close co-operation with Siemens' industrial unit. Organic revenues here climbed 13.2 per cent in the period, to €63.9m (£50.7m), generating operating profits of €4.89m. Although the group's performance in its English-speaking markets was weaker - partly reflecting a big exposure to recession-hit retailers and sales grew just 3 per cent to €36.8m. In fact, the overall profitability boost - the group gross margin rose 0.7 percentage points to 30.7 per cent - mainly reflected maturing managed service contracts, which helped offset pricing pressures at the consultancy business.
Broker Peel Hunt forecasts adjusted full-year pre-tax profit of €9.8m, giving EPS of 24¢ (from €7.3m and 18¢ in 2011).
SQS SOFTWARE QUALITY SYSTEMS (SQS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 224p | MARKET VALUE: | £62.5m | |
| TOUCH: | 222-226p | 12-MONTH HIGH: | 225p | LOW: 146p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 254¢* | NET DEBT: | 20% | |
| Half-year to 30 Jun | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 95.3 | 1.96 | 5.00 | nil |
| 2012 | 103 | 2.54 | 7.00 | nil |
| % change | +8 | +30 | +40 | - |
Ex-div:- Payment:- *Includes intangible assets of £57.6m, 206¢ a share £1=€1.26 | ||||
