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Momentum around managed services is still growing at software testing and quality management services supplier SQS and it is not done yet. Revenue from the segment now represents a third of total revenue and the plan is to take that up to 40%. As it is, SQS already has a welcome level of revenue visibility and all the signs are that it is set to improve. The current position of the company is vastly improved compared to 2011 (see the HotViews archive here).
Total revenue was up 7.9% to €102.8m, with profit before tax up 29.6% to €2.5m and net debt down 15% to €14.3m. Revenue from managed services almost doubled to €34m. The proportion of revenue from managed services stands at 33% compared to 19% this time last year. Reassuringly, the gross margin within this segment is improving, and was up 5.5% on the year to 29.9% as a result of maturing contracts. There are other signs that the quality of revenue is improving, including a focus on larger contracts with the express goal of improving margins, and increasing the value from existing customers using the transition to managed services as a vehicle. The transition also benefits SQS by generating a closer relationship with customers, something its value based pricing for higher value services is also designed to do.
H1 profits were impacted by recruitment, redundancy and US start up costs. With these behind it, the challenge for H2 is delivering rising profits and improved margins from current operations.
