SQS Software Quality Systems AG Preliminary results for the year

Transcrição

SQS Software Quality
Systems AG
Preliminary results for the year
ended 31st December 2006
Rudolf van Megen – Chief Executive Officer
René Gawron – Chief Financial Officer
David Cotterell – Managing Director SQS-UK
Agenda

Company Overview and Strategy

2006 Financial and Operational Review

Current Trading

Appendices
© SQS Software Quality Systems AG
Preliminary results for the 12 months ended December 2006 | March 30th, 2007 | Page 2
Company Overview
and Strategy
Rudolf van Megen –
Chief Executive Officer
David Cotterell –
Managing Director SQS-UK
Summary 2006
2006 was another excellent year for SQS.

Company Profile

Business

Strong top line growth of 44% to € 78.9m
(2005: € 54.7m)

Profit before taxes (adj.) up 44% to € 5.3m
(2005: 3.7m)

Earnings per share (adj.) up 27.3% to € 0.28
(2005: € 0.22)

Proposed dividend/return of capital of € 0.08 per
share (2005: nil)

Integration of Cresta was successful and earnings
enhancing in 2006
Highlights
The leading independent pan-European provider
of quality management and testing services for
software development
Floated on AIM in September 2005
Why there is a need for Software Testing and Quality Management
SQS makes IT projects more successful.
When
Problems during the
entire software lifecycle
Plan

Design

Build

Implement

Performance Gap
Manifestations
Business Requirements
Complexity

What Impact
Why

Unlimited scalability

Bug-free in less time
at lower cost
100%

Networked economy
80%

Assured quality
60%
33
53
46
49
51
28
23
15
26
28
34
40
40%
Operate
31
20%
16
27
53
18
29
0%
1994 1996 1998 2000 2002 2004
IT Solutions
Time
IT projects
Succeeded
Failed
Challenged
Standish Group Study 1994 - 2004
SQS bridges the performance gap by quality improvements, and savings on time and costs
SQS compared with IT Service Market
Our market leadership in software testing and quality management
helps us to grow faster than the IT service market
Market/SQS Revenue Growth Rate Comparison (organic growth)
Remarks:
18,0
18,0

Purely organic growth
came to nearly 4 times
the market growth

More exposure to
markets where we are
the absolute market
leader :
16,0
12,5
14,0
12,0
8,8
10,0
in %
8,0
6,0
4,7
5,3
4,6
5,4
4,0

2,0
0
0,0
2004
2005
2006
SQS
2007
IT Services market

GE, UK, CH
Strategy to work on
market leadership was
right.
Market date source: EITO 2006, IDC 2006
SQS growth rate excl. acquisitions
The SQS market
The above average growth potential for SQS lies in the expected
strong increase of the testing part going to external service providers
SQS has an approx.
10% market share
IT Services Europe (CAGR: 5% p.a.)
150b €
11b €
SW App.
Developm./
75b € Syst. Int.
1.1b €
Test
Specialists
Testing/QM
15%
250m €
10%
External Serv.
Providers
Systems
integrators
850m €
This share is
expected to
double in the
next 5 years
Source: EITO 2006 for overall market,
*Coleman Parkes/ PAC 2007 Research for testing/QM
22%
70 per cent. of respondents want an
independent testing organisation*
Competitive Landscape
SQS is the largest player in its market and seeks to continue market
consolidation.
Test & Data
4
6
7
ps-testware
Vizuri
Quality
House
MTP
SQS is well positioned to
capitalise on the opportunities
available
9
11
12
FHG/IESE
Microgen/
IMAGO
12
16
MAP
20
20
20
21
23
Tesnet
Q-LABS
Capita/
Mission Testing
Optium
RelQ/EDS
Applabs/
IS Integration
Customers internal teams
are considered as main
competitors (90% is done
inhouse)

Fragmented market
25
41
Tescom
Logica
CMG/TEST
SOGETI
Transiciel/SC
45
75
SQS
(€m)

79 / 92
Actual / pro forma
0
10
20
30
40
50
60
70
80 90
Source: SQS, based on estimated 2006 sales figures
System Integrator/IT Services Group, not independent
Growth Strategy
We plan to grow organically and by acquisitions.
Organic

Add more consultants and services to SQS’s existing client base

Target existing clients for long term outsourcing and managed service
contracts

Continue to develop more strategic clients (> € 1m)

Increase our presence in software testing of embedded systems

Extend co-operation with system integrators (e.g. IBM) on their
demand for (independent) testing
Acquisitive

Successful track record of integrating acquisitions

Consolidate other specialists and pursue in-fill acquisitions
Financial and
Operational Review
René Gawron –
Chief Financial Officer
Results Highlights
Organic growth close to four times the wider European IT services
market.
Financial Highlights:

Turnover up by 44.2% to €78.9m (2005: €54.7m)

Profit before tax up 44.0% to €5.3m (2005: €3.7m)

Adjusted earnings per share up 27.3% to €0.28 (2005: €0.22)

Dividend/return of capital of €0.08 per share (2005: nil)
Business Highlights:

Achieved 18% organic top line growth- well ahead of European IT Services Market *

Repeat revenues now 75% of turnover

400 active clients in 2006 - with approximately 100 new clients won during the year

Strengthened delivery capabilities - following investment in more than 100 new
consultants

Increased offshore projects - with first own offshore facility in South Africa and securing
7 long term contracts the majority with offshore components
* acc. to European information technology Observatory (EITO) 2006 study
SQS Business Model
The majority of SQS revenues are billable days by its own consultants.
Revenue 2006
78.9 mil €
Revenue 2005
11.1 m € with 15%-20%
gross margin
54.7 mil €
Tools
Conferences
Services with contractors 4.4 m €
Services with
own
consultants
47.5 m €
average
453*
own
consultants
185 days
billable
in FY
768
€/day
64.3 m €
* 563 consultants at year end 2006
Consultants
Utilisation
Charge out rate
Profit & Loss statement
2006 adj. PBT growth was in line with revenue growth.

PBT (adj.) increased
by 44.0%

Overhead costs
remained at same
level in % of turnover
as in 2005 while net
interests were cut by
50%

Gross margin was
impacted by slower
than expected price
improvement in the
German market, but it
significantly improved
from HY1 2006
Balance Sheet
Strengthened balance sheet

Net Assets up €8.3 m
due to 2006 net
income and Cresta net
assets

Net debt of only
-€3.2m

Trade receivables at
75 debtor days (2005:
65) due to slower
purchase order
process and invoicing
mainly in the UK

Liabilities from Cresta
purchase (€10.9m) will
be settled with SQS
shares
Cash Flow statement
Good operating cash flow despite increased working capital
requirements.

Continued good
operating cash flow

Increase in
receivables by €10.8m
due to strong growth
and slower collection
in the UK has
impacted operating
cash flow

Investment activities
include €4.5m cash
payment to Cresta
shareholders
Earnings per share
EPS up 27.3% to €0.28 per share

Actual taxes on
income at 15.2 % of
PBT due to tax breaks
under local GAAP
(adjusted tax rate)

Actual tax rate is
expected to be
approx. 25% in 2007
and 32% in 2008
Segmental analysis
Our EBIT target continues to be 9%

Strong organic revenue
growth in Switzerland
(+34%) and Germany
(+22%)

UK revenue growth of
159% was mainly
acquisitive

Profits in Germany were
impacted by delayed price
recovery

Measures taken last year
to improve UK profitability
were successful

Cresta integration
produced immediate
overhead savings and
enhanced earnings
Dividend policy
SQS will return €1.4m to its shareholders.

Intention to return €0.08/share to shareholders

SQS is currently reorganising its net asset base to enable it to pay a
dividend. Such reorganisation will not be complete in order to enable
SQS to pay a dividend in respect of its 2006 financial year

SQS now proposes to pay an enhanced dividend for its 2007 financial
year

The 2007 dividend will be payable following the AGM in May
2008
We are confident that there are no further structural issues that will
prevent the payment of dividends to shareholders in future years
Current trading
Rudolf van Megen –
Chief Executive Officer
Current Trading
The current year is in line with expectations.

Good start to the year - trading is in line with the board’s expectation

Robust pipeline

New strategic accounts with long term engagements

We have the right team in place to capitalise
on the opportunities available and deliver long term shareholder value
Appendices
Key SQS services in Software Quality Management and Testing
In many of its large customer projects SQS provides the full range of
independent quality services.
Business Consulting
Process Consulting
Requirements
CQM*
Business
Demand
Specification,
Design,
Realisation
A
c
c
e
p
t
Roll
Out
Independent Testing
Documentation
Independent
= independent from the software design and engineering part
SQS Quality Services
* CQM = Code Quality Management
Strategic Goals
The SQS strategy is built on five strategic goals.
Global goals of
SQS Group Strategy
Extend
leadership in
independent
quality
management
and testing by
delivering added
value to our
customers in
order to achieve
their goals
Grow the
business
significantly
above the
market growth
rate for IT
services
Remain the
financially
strongest
independent
quality service
company in
Europe
Extend and
Trendsetter for
retain a strong Quality Aspects
base of highly in Business / IT:
motivated,
Anticipate
skilled, and best
major trends
performing
and use this for
employees
clients benefits
SQS History
SQS was the first mover to establish a market for independent quality
management and testing 25 years ago.
Germany
International
2001:
Acquisition
of SQS B.V.,
NL
2002:
2005:
JV in
IPO on
1998:
2003:
Portugal
AIM
First
Transferred
established
international
remaining
JV in Spain
2001:
2002: SQS BOOTSTRAP
Acquisition:SIM Switzerland Institute to ISQI
1996: Conference
(SQS-UK)
established
2000:
and training
2005
%)
Opening of (100%)
business started
2003
SQS Austria
1996:
2002
Active member of
2001
2003:
the BOOTSTRAP
2000
Developed
Institute
SQS Service
1997
Offering to
2001:
1996
higher level
Merger of
1986
services
1997:
DTK and
1982
First acquisition: SQS
1986: 1st tool
DTK (today BU
developed for test
Industry &
case specification
1982:
Engineering)
Foundation of SQS
2006:
Acquisition of
Cresta (now
merged with
SQS UK)
2006
Acquisitions
and
joint ventures
Gesellschaft für SoftwareQualitätssicherung mbH
What keeps SQS ahead from its competitors
SQS’ methodology is in use by many of its clients. Data and experience
from over 4,000 projects keeps SQS ahead from competition.
Proprietary Methodologies
Developed over the course of
approx. 4,000 projects
Services
End-to-end portfolio including
435
emerging skill sets
Employees
More than 700 employees*
Clients
Serving approx. 400 blue chip
300 bluechip
clients
Geography
8 countries; 14 offices
*: at the end of 2006
Development of number of shares
The Cresta Ltd. consideration payable in shares is expected to be
earnings enhancing per share if all earn out targets are met
Forecast if all earn out targets
from Cresta deal are met
12/2005: 07/2006:
15.76m 17.19m
Additional nb of
shares issued
for Cresta
acquisition
Additional net
earnings from
Cresta
consolidation
EPS on new
shares
Adj. EPS
actual/estimates
08/2007:
20.05m
08/2008:
22.45m
1.43m
2.86m
2.40m
Total:
6.69m
1.737m €
1.712m €
0.856m €
Total:
4.305m €
1.21 €
0.60 €
0.36 €
0.64 €
0.28 €
0.31 €e*
0.32 €e*
Unaudited add. information, in
case full earn out targets are met
* analyst estimate
Revenue development by product line
Growth came from our core business – consulting and services

Consulting and service
revenues up 45%

SQS testing tools
underpin our technology
leadership

IT training and IT events
(conferences) supports
SQS profile – new SQC
conference in Zurich in
2006 was immediate
success
Case study – Sarbanes Oxley
Lloyds TSB is a good example of a long term client with a huge
potential to increase SQS revenue.

Objective
To meet December deadline for compliance with
Sarbanes-Oxley regulations

Challenge
Covered more than 50 different applications over five
platforms, with seven parallel streams of work being
undertaken across multiple locations.

Solution

Phase 1 - Definition of test approach

Phase 2 – Test execution to ensure 100%
coverage
‘As a team we have
shown what is possible
and produced a major
success for Group IT at
the same time.’
Bob Spencer (Head of
Group IT Information
Security)
Benefits

Full compliance testing ensured that LloydsTSB
were confident of full SOX compliance

LloydsTSB internal deadline of 30th June was met
Case study – Offshore testing, South Africa
Off-shore secures on-shore business.

Existing onshore client (UK)

Technology/IS company

Automated
Functional Testing
(Script Host & Launch)
Client Background
Load Generators
Functional Test
Environment
Leading provider of messaging security and management
services to business
Test Management
(Quality Center)
Load Generators
Non-Functional Test
Environment
South Africa staff involved in onshore projects in 2005
Project Background

Secure “Enterprise Instant Messenger” messaging service/application

Involving US & Canada

Upgraded technology platform

2006 delivery (February to June 2006)

Successful EIM launch 12th June 2006
Offshore
Test Team
Some key benefits

Significant cost reduction by use of offshore resources and facilities

Approximately 50% reduction in cost using offshore test team
Significant test coverage gains achieved through pioneering automation by technically-savvy offshore
resources.

Reduced test execution from 8 hours to 6 minutes
Customer Quotes
Our customers are of high value for the business.

“The release was not only the largest deployment but was also
delivered to an exceptional level. Several days after the deployment
there are no significant operational issues in the performance of the
system deployed.“ Mike Stacey, CTO, Vodafone Ireland

"They were innovative and offered a service based delivery –
structured around Test Points and using the Cresta TestStrategist
software application to provide visibility and predictability." Tim Allen,
Change and Execution Director, egg Bank

“SQS have made a major contribution to helping us raise the bar on
the quality of our appli-cation. They have had a significant impact on
helping us increase the quality of our applica-tion in a fast-paced and
dynamic environment whilst also helping us to deliver a quality
application on time." Dominic Shine, CIO, Beazley
SQS Software Quality Systems AG
Ende
Stollwerckstraße 11
51149 Köln
Deutschland
Fone:
Fax:
+49 22 03 91 54-0
+49 22 03 91 54-15
E-Mail: [email protected]
Internet: www.sqs.de
Internet: www.sqs-group.com