RESULTS: A shift towards longer-term contracts with big clients like BP, JP Morgan and Reuters continues to pay off at SQS Software (SQS). The Germany-based software-testing specialist improved its gross margin by 80 basis points to 32 per cent, pushing up profits by 10 per cent.
The managed-services segment, which focuses on contracts lasting six months to five years, led the pack. Sales in the division climbed 24 per cent to €91m (£75.44m), so that it now accounts for 41 per cent of the total, almost double its share in 2011. Moreover, SQS Software’s big-fish focus boosted average revenue per client by 23 per cent, as it reduced its client base by 13 per cent. The trade-off involved a small loss at its lower-margin regular testing business, which accounted for 34 per cent of sales - down from 38 per cent in 2012.
The company made strides elsewhere, too. It acquired software-testing business Thinksoft, which should improve its financial-services expertise and give SQS Software a presence in untapped nations like Singapore and Australia. It may also bolster its thriving US business, which accounted for 3 per cent of revenues, up from 0.2 per cent in 2012.
Broker Panmure Gordon increased its full-year estimates slightly and now expects adjusted pre-tax profits of €16.8m, giving EPS of 42.8¢.
| SQS SOFTWARE QUALITY SYSTEMS (SQS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 559p | MARKET VALUE: | £171m | |
| TOUCH: | 552-565p | 12-MONTH HIGH: | 565p | LOW: 249p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | 38 | |
| NET ASSET VALUE: | 292¢* | NET DEBT: | 3% | |
| Year to 31 Dec | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2009 | 134 | 4.9 | 14 | 7 |
| 2010 | 163 | 6.4 | 18 | 8 |
| 2011 | 189 | 5.6 | 15 | 5 |
| 2012 (restated) | 210 | 7.8 | 21 | 7 |
| 2013 | 226 | 8.6 | 18 | 9 |
| % change | +8 | +10 | -14 | +29 |
Ex-div: tba Payment: tba *Includes intangible assets of €57.4m, or 188¢ a share £1=€1.22 | ||||
