A trading update from SQS shows that the partnership agreement signed with Siemens in May this year to provide testing services to its automotive manufacturing clients is working out to be a good move. Shortly after the agreement was signed SQS signed a few small deals and has built on these with a further 6 contracts (3 in Europe, 1 in Japan which is a new territory, and 2 in the US which is a region of strategic focus). The contracts in the US and Japan are indications of progress on its strategic goals of increasing the US business (initially concentrating on the automotive area with the aim of moving into the high margin software testing sector), and moving into new territories. Elsewhere, it has also won three new contracts in the UK, and a multi year deal with a Swiss transport infrastructure company, that together are worth c€10m over two years. What was missing was insight into the impact on H2 revenues.
The managed services business is continuing to move forward, rising from 33% of annualised revenues as of June 30 to 35%, and on route to its 40% by 2014 target due to extensions and expansions to existing contracts. The challenge here is improve margins (see here). as there is a wide gulf between those on mature and new contracts. It all makes for an apparently pleasing start to H2 and reflects similar vibes from NCC Group (see here).