SQS Software Quality Systems AG Regulatory News (SQS)

14 May 2009 07:00

14 May 2009

SQS Software Quality Systems AG

("SQS" or "the Company")

Trading Update

SQS Software Quality Systems AG (AIM:SQS.L), the world's largest supplier in independent software testing and quality management services, is today providing an update on trading for the year to date.

Trading in the early months of the year was in line with budgets. Latterly, however, tactical decisions by a number of clients to suspend live projects at short notice, often for a number of weeks, have meant that, despite new client wins, planned improvements in utilisation have not occurred. In addition, pricing levels have come under pressure, which has impacted margins. 

As a result, SQS now expects that its adjusted profit before tax for the six months ending 30 June 2009 will be approximately half of the level reported for the first half of 2008. The Company's turnover for the first half of 2009 is expected to increase by 2% (6% at constant exchange rates) year on year, continuing to outperform the 2% contraction in growth for the Computer Services sector that Gartner is now forecasting for 2009 (Gartner, April 2009).

SQS continues to be cash generative and debt free and is therefore well positioned to deal with the current adverse market conditions.

SQS has seen a significant recent tightening of demand in its core markets of Germany, the UK and the Nordic countries. The relatively benign conditions experienced in January and February giving way to a material change in market conditions as the impact of the global recession took hold. During the same period SQS has seen strong sales growth and improving profits in the Swiss and Austrian markets. In addition, its offshore business continues to record double digit top line growth. 

SQS's sales and lead generation functions remain strong, with 44 new client signings in the year to date, approximately the same number as at this time last year. Among the new client wins are telecoms operator Telenor, DIFI - a public service organisation in Norway, a federal finance ministry of a European country and one of the leading European airlines.

Rudolf van Megen, Chief Executive Officer of SQS commented, "The pressure we have experienced to our margins is disappointing. However, prices and utilisation levels do appear to have bottomed out and we are actively taking steps to improve sales and utilisation going forward. We have taken, and are continuing to take, measures to reduce the average cost of sales per consultant by growing the offshore and near-shore test centres and by adjusting our onshore cost structure to better suit the current market. Our sales engine is strong and has helped us to grow business volumes in a receding market. As such, we are confident that operating margins will improve during the second half of 2009." 

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About SQS

SQS is the world's largest supplier in independent software testing and quality management services. SQS consultants design and oversee quality management processes during software and IT systems development and test the resulting products for errors and omissions.

Headquartered in Cologne, Germany, SQS has approximately 1,400 employees across Europe, Asia, North America and Africa. The Group has a strong presence in Germany (Cologne, Munich, Frankfurt, Stuttgart, Goerlitz and Hamburg) and in the UK (London, Woking, Birmingham, Manchester, Belfast), Ireland, the Netherlands, Switzerland, Austria, Sweden, Norway, Finland, India, Egypt, the United States and South Africa. SQS also has a minor stake in an operation in Portugal and a partnership operation in Spain.

With more than 5,000 completed projects, SQS has a strong customer base including 36 FTSE-100 companies, half of the DAX 30 and nearly a third of the STOXX-50. It supports clients in a wide range of industries, including major corporations such as Deutsche Bank, Deutsche Telekom, Deutsche Post, Barclays, Allianz, Meteor, BP, JP Morgan, Volkswagen, and Daimler.

www.sqs-group.com