SQS Software Quality Systems

REDUCE

30/11/2011 Ben Jaglom

German software testing concern SQS Software Quality Systems (SQS) has won its largest ever contract.

The AIM-quoted concern declared that it had won a contract worth €20m (£17.1m) over the next two and a half years with a company it describes as a 'global financial services client'. SQS notes that services are to be provided onsite in the early stages of the contract, with 'an increasing proportion of the work moving to off shore' as it matures. As part of the arrangement, 30 employees of the customer are to work under SQS.

The German venture noted it has received €62m worth of orders for its managed services this year, adding this part of its business now comprises 25% of revenues of the group as a whole, enthusing that it 'remains in line' to achieve its goal of having 50% of revenues within the next 3 years from managed services contracts.

Chief executive officer Rudolf van Megen argued that the win is 'further evidence of the success of our strategic move into the provision of managed services' adding that it 'demonstrates our ability to compete for and win ever larger contracts'.

Analysts at Collins Stewart are forecasting pre-tax profits of €9.6m (£8.2m) on sales of €189.4m for the year to December 2011. EPS of 26 cents (22.2p) and 33 cents (28.2p) are penciled in for 2012 and 2013, respectively.

Last recommended by Growth Company Investor this September at 178p the shares currently trade at 158.5p. While the contract win bolsters SQS's future prospects the shares have been under continual pressure this year, sliding from an earlier peak of 243p. At the current price further strain looks a distinct possibility as investors have largely sought to avoid the software sector this year. Reduce.