8th Sep 2015 07:10
LONDON (Alliance News) - SQS Software Quality Systems AG saw its shares fall on Tuesday morning after it downgraded its expectations for the full year due to actions it is taking to mitigate margin pressures in its regular testing arm, even as revenue and its pretax profit both increased in the first half.
SQS said it is facing margin pressures in its regular software testing business by reducing client numbers, its overhead costs and headcount. Due to those issues, it is taking a more cautious stance on its outlook for the full year and anticipates its profit will be slightly below its previous expectations.
The weaker expectations were unveiled as the group posted a rise in pretax profit in the six months to the end of June to EUR5.2 million from EUR3.7 million, as its revenue rose to EUR150.3 million from EUR129.4 million. Revenue in its managed sales business rose 26% in the half and the group improved its US revenue in the half.
But while margins in its managed services and specialist consulting services units were broadly flat or improved, its regular testing services margins dropped to 26.4% in the half from 33.6% previously, due to weaker margins in some larger contracts.
"The performance during the first half has further strengthened the fundamentals of our business and our growth strategy, despite lower gross margin performance in Regular Testing Services. With MS now accounting for nearly 50% of revenues and a record order intake, the company is well placed to continue building on the momentum achieved to date," said SQS Chief Executive Diederik Vos.
Shares in SQS were down 17% in early trade to 475.00 pence, the worst performer in the AIM All-Share.
By Sam Unsted; [email protected]; @SamUAtAlliance
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