The growing use of complex software in cars, consumer products and workplaces is great news for SQS (SQS), which roots out glitches and bugs for the likes of UBS and Volkswagen. Together with its focus on large, long-term contracts and selective acquisitions, that drove a 52 per cent increase in adjusted pre-tax profits to €18.8m (£13.6m) last year.
The Cologne-based group delivered a 32 per cent increase in sales of managed services, whereby it handles clients' software and IT testing for one to five years. The division landed several new contracts and extended others, including three in Europe (with two banks and a telco) worth a combined €55m. That widened its margins, swelled the order backlog and sent the group's average revenue per client up by more than a third to €634,000. It also pushed SQS's bank account into the black: in 2013 it had net debt of €2.9m.
India-based Thinksoft - acquired in late 2013 - contributed €26m in revenue. SQS's former competitor helped it more than double its US revenues to north of €12m. Yet organic sales also rose 7 per cent as the group captured a larger share of the European market, which accounts for more than 90 per cent of its revenues.
Broker Panmure Gordon expects pre-tax profit of €22.6m for 2015, giving EPS of 48.5¢, up from €18.8m and 43¢ in 2014.
| SQS SOFTWARE QUALITY SYSTEMS (SQS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 567p | MARKET VALUE: | £173m | |
| TOUCH: | 558-575p | 12-MONTH HIGH: | 614p | LOW: 508p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | 31 | |
| NET ASSET VALUE: | 306¢ | NET CASH: | €9.8m | |
| Year to 31 Dec | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2010 | 163 | 6.4 | 18.0 | 8.0 |
| 2011 | 189 | 5.6 | 15.0 | 5.0 |
| 2012 | 210 | 7.8 | 21.0 | 7.0 |
| 2013 | 226 | 8.6 | 18.0 | 9.0 |
| 2014 | 268 | 10.1 | 25.0 | 13.0 |
| % change | +19 | +18 | +39 | +44 |
Ex-div: 14 May Payment: 28 May *Includes intangible assets of €74.3m, or 243¢ a share £1=€1.38 | ||||
