13/09/2006
Despite posting profits slightly below expectations due to significant investment in people, interim figures from Cologne-based software testing supplier SQS were loaded with optimism.
55 new consultants were taken on and trained during the period, which ‘influenced profits,’ said chief executive Rudolph van Megen, ‘but we did it as we expected sales in the second half to be very strong.’ He is confident of reaching full year targets and says that early second half numbers are good, adding that SQS has ‘a very strong pipeline’. For the six months to June pre-tax profits rose 2.4% to €1.7m (£1.2m) from revenues up 18.5% to €31.5m. Borrowings were cut by €8.6m to €6.4m.
To reduce dependence on its German market leading position, SQS made its first acquisition since floating on AIM, picking up profitable London-based testing and quality management group Cresta in July for up to £18m in shares and cash. The purchase makes the group UK market leader and means it now derives 40% of revenues from these two markets.
26 new clients were signed in the half and management made strenuous efforts to improve the visibility and quality of earnings: repeat business accounts for 80% of sales, the group's dependence on larger customers is reducing and a greater number of clients are signing longer-term contracts. Furthermore, Van Megen is tentatively taking SQS into business consulting so as to be in an advanced position to steer clients towards its testing services.
House broker Evolution forecasts earnings ahead almost a third to 28.9c from profits up 78% to €6.6m. A forward p/e of 10.3 is big discount to the sector. Growth Company Investor tipped the shares in February at 211.5p and they are now even more attractive. Strong buy.
| Market cap: | £34.81m |
| PE Average: | 18.1 |
| PE Forecast: | 10.3 |
| Share price: | 202.5p |
| AIM | £46.78m |
205.00p
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2.00p
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| Other company articles: |
| 06/03/2008 |
| 17/12/2007 |
| 03/08/2007 |
| 08/03/2007 |
| 06/10/2006 |
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