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SQS Post Strong 6m Results

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DateFriday, October 03, 2008


Software Quality Systems, a global software testing and quality assurance out sourcer with operations in Belfast and Dublin, has have released interim results for the six months ended 30 June 2008.


Phil Codd, MD SQS Ireland expects a monumental 2009

The financial highlights were

Turnover up by 23 per cent to EUR 68.9m (H1 2007: EUR 56.2m).


Gross profit up 23 per cent to EUR 23.9m (H1 2007: EUR 19.4m) with gross margin increasing slightly to 34.7 per cent (H1 2007: 34.5 per cent) owing to improved utilisation of staff, success of off-shoring strategy and improved pricing conditions driven by strong market demand


Adjusted profit before tax up by 45 per cent to EUR6.7m (H1 2007: EUR 4.6m) with profit margin improving to 9.7 per cent (H1 2007: 8.1 per cent) as a consequence of synergies and improved operational efficiencies resulting from the successful integration of acquisitions


Adjusted earnings per share grew by 21 per cent to EUR 0.23 (H1 2007 EUR 0.19)


Cash inflow from operating activities improved by 12 per cent to EUR4.2m (H1 2007: EUR3.8m)


Announcing the results Chief Executive Officer Rudolf van Megen said "In the first six months of 2008 we further reinforced our position as the global leader in independent software testing and quality management services, maintaining our growth rate at five times that of the European IT services market* "


We also recorded further increases in our gross margins as the result of improved pricing conditions driven by strong market demand for our services. Given that economic conditions are widely regarded as being difficult at present, this would suggest that our offerings constitute a non-discretionary requirement among organisations."


Mr van Megen echoes Gartner's recent recognition of Independent Software Testing as a distinct sector in its own right. SQS have been pioneering this movement for quite a number of years, and have ran the Software Quality Conference in Germany and England. This year, in March, the inaugural SQC Ireland attracted some 200 delegates from across the whole country so it seems that there is indeed a real acceptance that the  and test arena has to be brought to the stage front if Ireland is to continue producing quality software especially as it is now required to run on several different platforms and becomes ever complex.



In addition, SQS recruited a further 140 people (mainly consultants) globally, around 11% increase giving them a workforce of 1400. In the same period, they won 78 new clients against 64 in the same 2007 period, an increase of over 20%, and long term contracts have increased by 60% to 23.


Commenting further van Megen continued, "Adjusted profit margins showed still greater increases, largely as a consequence of lower overheads resulting from synergies and economies of scale provided by prior acquisitions, while cash conversion remained high as the result of strong control over debtors and creditors.


So what does this mean in Irish terms, where the large majority of business tends to be SME. Here in Ireland Phil Codd, (pictured) ex SAP Ireland has recently taken the helm. Whilst specific figures are not available for the contribution the Irish business has made, what we do know is that growth in the UK / Ireland and South Africa division has been a rather more modest 6.4% at €23.9m. (35% of group turnover).


Dublin and Belfast, the locations that Codd has responsibility employ just shy of 100 people which represents 20% of the UK / Ireland and South Africa centre (there's 100 employees in Africa mainly off shoring for UK and Irish contracts). That employment figure scales up to being 35% of the global workforce (in line with the groups turnover) and we can speculate that SQS Ireland has made turnover of around €4.8m over the first half of 2008.


Codd has a clear multi directional strategy for the next 18 months. He said "Our main focus is to grow our presence in the North of Ireland, and we will target the public sector heavily. Next to this, we have 20 projects running concurrently and even in the bleak economic outlook over the next 24 months, a number of our Clients realise that they have to be ready for the recovery."


Lastly, it is clear that the Irish software market (and those involved in it) is embracing the outsourcing and collaboration of their test and quality. Codd continued "SQS has to unlock the secret of its brand in Ireland and we shall be working hard to ensure that SQS Ireland is competing for new business consistently. I expect low double digit growth in 2009."


SQS Ireland have made some notable gains recently with key contract wins including that with Anglo Irish Bank, Ireland's third largest bank announced in May and with Codd's extensive experience at this level now at play, we look forward to seeing full year results.


* According to IDC market study, European IT Services will grow 4.6 per cent in 2008).



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