SQS Software Quality Systems AG

Transcription

1 SQS Software Quality Systems AG Preliminary results for the year ended 31 December 2007 Rudolf van Megen Chief Executive Officer René Gawron Chief Financial Officer David Cotterell Managing Director SQS-UK SQS Software Quality Systems AG

2 Agenda SQS Group and Strategy SQS Group an overview Strategic priorities for 2007 a reminder Financials Profit & Loss statement Balance sheet Cash Flow statement Dividend policy Financial results summary SQS in the market Market Clients Strategic summary and outlook SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 2

3 SQS Group at a glance SQS is the global leader in independent software testing and quality management services. 26 years of prosperous operations Over 4,000 successfully completed projects Growing 4-5 times faster than the IT services market growth rate The customer base includes 36 FTSE-100 companies, half of the DAX 30 companies and nearly a third of the STOXX-50 companies The SQS philosophy is to make IT projects successful Business Demand Independent SQS-Quality Services = independent from software-design and engineering Acceptance Rollout Management Consulting for Business Requirements Specification Design Coding Testing Process Consulting Independent Quality Management Application Intelligence Documentation SQS is listed on the AIM London SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 3

4 SQS strategic priorities for 2007 a reminder SQS has achieved all strategic goals for Develop client base Expand market verticals Target clients for long term outsourcing and offshoring contracts Continue to improve profits Improve operating cash flow Make smart acquisitions Continue organic growth Investment to support growth Pay an enhanced dividend 55 strategic clients / 65% of total revenue 7 market verticals Long term contracts share of revenue increased from 8% to 11% Adj. PBT up 96 %, again outpacing revenue growth Operating cash flow increased 8 times Two earnings enhancing acquisitions in the last 24 months 27% top line growth, outpacing market five times Nearly 250 new consultants added Dividend of 0,20 will be proposed SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 4

5 Profit & Loss statement PBT growth strongly outpaces revenue growth. Overhead costs (G&A, S&M, R&D) reduced by 1% of revenue leveraging from group growth SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 5

6 Balance Sheet Strengthened asset base Net cash position of 6.9m, enabling further growth Trade receivables at 61 debtor days (2006: 75) due to improvements in invoicing and collection Majority of liabilities for Cresta and Triton purchases will be settled with SQS shares SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 6

7 Cash Flow statement Improved operating cash flow enabling further growth. Investment activities include 4.4m cash payment for Triton acquisition SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 7

8 SQS Business Model 82% of SQS revenues are billable days by its own consultants Revenue FY 2007: m Tools (2%) Training & Conferences (3.5%) Services with contractors (15%) Onshore: average /day onshore Services with own consultants (incl. Training) (82%) Average: 725 own consultants 1) 187 days billable per consultant Offshore: average /day offshore 1) 809 at end of year SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 8

9 Dividend policy We propose to pay an enhanced dividend for SQS proposes to pay an enhanced dividend (incl. 2006) of 20 -cents per share for its 2007 financial year The 2007 dividend will be payable following the AGM on May 28, 2008 SQS proposes to continue to operate a dividend policy in line with earnings SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 9

10 Financial results summary All financial results for 2007 are exciting: PBT increase was nearly twice the Revenue growth Revenue up 53% (in m) Adj. PBT up 96% (in m) Adj. EPS up 46% (in -cent) Operating cash flow strongly improved (in m) Triton acquisition was successful and immediately earning enhancing Gross Margin improved ahead of top line growth due to higher pricing and good consultants utilisation Strong net cash position improvement of 10.1m to 6.9m enables us to fund further growth and acquisitions SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 10

11 Diversification of market verticals We have followed a strategy to develop the smaller verticals of our client base. Verticals in ) Verticals in ) Other: 5% Utilities: 0.5% Electron./Technology: 1% Other: 7% Fund Mgt.:1.5% Legal&Media: 3% Finance: 29% Electron./ Technology: 6% Fund Mgt.: 3% Utilities: 6% Finance: 28% Auto/Aero/ Defence: 6% Legal&Media: 5% Insurance: 6% Auto/Aero/ Defence: 7% Telco: 12% Public: 14% Retail& Services: 20% Insurance: 9% Telco: 7% Public: 7% Retail& Services: 17% 1) All percentages: percentage of total SQS Group revenue SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 11

12 Relevant SQS market The growth potential for SQS is a strong increase in testing outsourced to external service providers. 79% acknowledge that software testing is essential in IT product development, two thirds consider the independence of the test team from the software development team as important, 79% agree that test automation strongly contributes to real value returns in IT investments and 34% responded that the budget for external test consultants will grow, 34% said it will stay the same but only 3% replied it will go down. IT Services Europe (CAGR: 5% p.a.) 150b SW App. Developm./ Syst. Int. SW App. Developm./ Syst. Int. 75 bn Testing/QM 17.5% Testing/QM 13bn 10% External Service Providers External Service Providers 1.3bn Test Specialists 300m 50% Systems 1,000m integrators This share is expected to double in the next 4 years SQS has an approx. 10% market share Sources: EITO 2006 for overall market; PAC: International Market Analysis Software Testing, 2008 for Testing/QM SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 12

13 Case study Sarbanes Oxley Lloyds TSB a long-term client with a huge potential to increase SQS revenue.» 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 «Objective To meet December 2007 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 Benefits Full compliance testing ensured that LloydsTSB were confident of full SOX compliance LloydsTSB internal deadline of 30 June was met SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 13

14 Competitive Landscape SQS markets and worldwide SQS strengthened its position as the largest player and seeks to continue further market consolidation. Pure Play Test Specialists System Integrators (testing part of total business) SQS 121 Tescom Optium 21 Q-LABS 20 Tesnet 20 FHG/IESE 12 SDLC 11 MTP 11 Thinksoft 10 ps-testware 9 Quality House RTTS 7 Insight 7 Vizuri 7 Validate 6 Verisoft 4 Test&Data 4 ( m) TCS 66 Satyam 50 Logica CMG/ TEST 45 Applabs/IS Integration 30 RelQ/EDS 23 9 Capita/Mission Testing 20 Wipro 187 Infosys 150 SQS 121 Cognizant 113 SOGETI/SC 110 ALTRAN/MAP 16 Microgen/ IMAGO 12 ( m) Independent Testing/QM Provider System Integrator/IT Services Group, not independent Source: SQS, based on estimated 2007 sales figures SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 14

15 Strategic summary Organic growth enhanced by selective acquisitions Organic Further leverage SQS s existing client base and grow the 55 strategic clients Target existing clients for long term outsourcing and additional off-shoring service contracts Focus on the European market whilst expanding SQS offshore capacities Acquisition Successful track record of targeting and integrating acquisitions Strengthen foothold in Europe and explore opportunities to expand into Asia/Oceanic region SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 15

16 Looking forward Positive Outlook Outlook Trading has been very good in the year to date Strong pipeline More than 51% of the revenue expected for 2008 has either already been booked or contracted, a record for SQS We will consolidate our most recent acquisition Triton in the field of insurances management consulting New strategic accounts with long term engagements We look to the future with confidence SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 16

17 Annex SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 17

18 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 retain a strong base of highly motivated, skilled and best performing employees Trendsetter for quality aspects in business/it: Anticipate major trends and use this for clients benefits 1) Fußnote Quelle: SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 18

19 Why independent software testing is necessary Studies prove the demand for independent software testing An international study 1) showed: 65 per cent of survey respondents agree that software testing should be independent from development 68 per cent agreed that they will have to adapt their testing to compliance and regulatory requirements 79 per cent stated that automation can deliver real value and return on investment to the process of software testing 34 per cent of the companies want to rise their budget for external testing Global study on success rate of IT projects 2) Standish Group Study IT projects (in per cent) Failed Challenged Succeeded Detect errors earlier 1) PAC: International Market Analysis Software Testing, ) Standish Group Study SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 19

20 Proven processes Our methodology can be applied to all models: the V-Model (Verification & Validation) is one of them. Requirements Specification Acceptance Test Functional System Design System Test Technical System Design Integration Test Component Specification Component Test Verification Validation Coding time / order SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 20

21 Geographic segmental analysis 9% EBIT margin in sight targets under review SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 21

22 Earnings per share EPS up 46% SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 22

23 What keeps SQS ahead from its competitors Proprietary methodologies, our services and experience from over 4,000 projects keep us ahead of the competition. Proprietary Methodologies Developed over the course of approx. 4,000 projects 435 Services End-to-end portfolio including emerging skill sets Employees More than 1012 employees* Clients Serving more 300 than bluechip 400 blue chip clients Geography 8 countries; 17 offices *: at end of FY 2007 SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 23

24 Case study Offshore testing, South Africa Offhore secures onshore business. Client Background Existing onshore client (UK) Technology/IS company Leading provider of messaging security and management services to business 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 ) Fußnote 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 SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 24

25 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 application. They have had a significant impact on helping us increase the quality of our application 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 Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 25

26 Development of number of shares The Cresta and Triton considerations payable in shares have been and are expected to be earnings enhancing. FC Cresta earn-out FC Triton earn-out 04/2007: 18.69m 09/2007: 21.55m 09/2008: 22.88m** 10/2008: 23.74m 10/2009: 24.61m Unaudited add. information, in case full earn out targets are met Add nb of shares issued for Cresta acquisition 2.86m 1.28m Total: 4.14m Add nb of shares issued for Triton acquisition 0.86m 0.87m Total: 1.73m Additional net earnings from Cresta consolidation 1.712m 0.856m Total: 2.568m Additional net earnings from Triton consolidation 1.784m 1.784m Total: 3.568m EPS on new shares Adj. EPS actual/estimates e* e* e* 1.05 *analyst estimate average ** incl m shares increase from convertible bonds in 02/2008 SQS Software Quality Systems AG Preliminary Results for the 12 Months Ended 31 December 2007 March 6th, 2008 Page 26

27 SQS Software Quality Systems AG Stollwerckstraße Köln, Germany Phone: Fax: Internet: Internet: Thank your for your attention