News Column

SQS Pretax Profit Down On Acquisition Costs, Optimistic For Full Year

September 3, 2014

Sam Unsted

LONDON (Alliance News) - SQS Software Quality Systems AG Wednesday posted a fall in pretax profit in the first half on financing costs but reiterated its expectations for a robust full-year performance on the back of a rise in revenue.

Pretax profit for the software testing and quality management services provider fell to EUR3.7 million in the six months to June 30 against EUR4.1 million last year as the group was hit by a rise in finance costs in the period. These were primarily attributable to one-off integration costs related to the company's acquisition of a majority stake in Thinksoft, now SQS India BFSI, in April.

Earnings before interest, tax and amortisation rose in the period, however, to EUR4.8 million against EUR4.5 million a year ago. Revenue was up 20% to EUR129.4 million in the period, from EUR107.8 million last year, boosted by a big increase in Managed Services contracts to EUR57 million from EUR42 million year-on-year. SQS's Managed Services arm now accounts for 44% of the company's total revenue, up from 39% last year and in line with its strategy.

SQS said average revenue per client was up by a quarter year-on-year as it focused on larger, higher-value clients.

In its Specialist Consultancy Services arm, revenue dropped 23% in the half-year to EUR13.1 million from USD17 million last year, as a result of one of its clients shifting to its Managed Services division during the period. Regular Testing Services revenue was up 21% to EUR47.9 million on the back of the Thinksoft integration.

"We are delighted with our performance during the first six months of 2014 in which we have made significant progress across most metrics, and profitability in particular. This has been achieved through our continuing focus on larger, higher-value contracts and through ongoing margin improvement in our growing Managed Services business, as contracts are increasingly serviced from our expanding offshore and nearshore facilities," said SQS Chief Executive Diederik Vos.

"Our strong first half performance has continued into the second half and this, combined with our enhanced order intake for Managed Services, gives us confidence in meeting our expectations for the full year," Vos added.

SQS shares were up 1.9% to 537.50 pence Wednesday morning.

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Source: Alliance News

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