SQS 2015 Full Year Results

Transcription

1 SQS the world s leading specialist in software quality specialist in software quality Insurance Automotive & Manufacturing 2015 Banking & Financial Services sqs.com Telecommunications Energy & Utilities Retail & Logistics SQS 2015 Full Year Results 8 March 2016 Diederik Vos CEO René Gawron CFO

2 About SQS SQS is the world s leading specialist in end-to-end business process software quality assurance. Founded more than 30 years ago, we have established ourselves as the leading specialist for end to end software quality solutions, serving North America, EMEA and APAC. Banking & Financial Services The SQS mission is to shape and support the most critical and challenging software change initiatives. We support our clients through our deep industry know how and global delivery capability. Automotive & Manufacturing We focus on customers from six industries Insurance Driven by our standardised methodology PractiQ, industrialisation & automation processes. Telecommunications Retail & Logistics Energy & Utilities SQS Software Quality Systems AG Results for the 12 months ended 31 December March

3 Key Highlights FY 2015 Solid Progress in Managed Services, Increased Profits and Expanded Global Footprint. Growth % revenue growth with increased market share (7.5% organic growth) Gross Margin 36.5% for Managed Services and 34.1% for Specialist Consulting. Down to 26.5% for RTS. Capex Investments Order Intake Managed Services Invested 29m* in Bit Media / Trissential / Galmont and 4m in India Test Centre resulting in 5.9m net debt * incl. payments in shares 164m improving visibility and underpinning future growth (book to bill ratio at 1.07) Transition of business model Managed Services and Specialist Consulting now at c.60% of total revenues (up from 53%). SQS Software Quality Systems AG Results for the 12 months ended 31 December March

4 Achievements 2015 and Tasks Ahead Industrialised Managed Services are yielding results. Challenges in RTS resolved. Achievements 2015 Global footprint established with strong market presence in the US Completed and integrated three acquisitions in the US and Italy Strategic segments MS and SCS now account for nearly 60% of total business Reduced RTS segment to 31% of total, in line with strategy Best services portfolio to meet clients end to end quality demands Tasks Ahead MS: Managed Services SCS: Specialist Consultancy RTS: Regular Testing Services IoT: Internet of Things Push for further growth despite lower macro economic growth forecast across our markets Continue to critically review RTS contribution Expand our talent pool to enlarge services portfolio Enlarge portfolio with engineering skills to address growing IoT opportunities Build out Belfast based technology centre for digitalisation solutions Develop business in the local Indian market SQS Software Quality Systems AG Results for the 12 months ended 31 December March

5 Market Drivers Digitalisation changes business models fast: SQS is positioned to provide end-to-end Quality Assurance. Clients IT Business Initiatives Business Quality Assurance Realisation From application testing to Innovate 20% Invest Business experience assurance: improved customer retention, increased attraction, etc. Differentiate 30% Revenue generation Business timing & product quality assurance: improved time-to-market, improved process performance, etc. Run 50% Margin improvement Business foundation assurance: Improved technology performance, reduced cost, etc. Source: Gartner SQS Software Quality Systems AG Results for the 12 months ended 31 December 2015 March

6 Competitor Landscape SQS is the world s largest software quality services specialist by revenue and has moved to # 8 among system integrators. Pure Play Quality Services Specialists System Integrators (testing part only) # 1 SQS Qualitest Cigniti m IBM Accenture 1, Plan IT MTP Cognizant 920 Inspearit 22 Maverick 15 TCS 790 Imbus 15 RTTS 15 Cap Gemini 700 QA Infotech 15 Wipro 570 Galmont 14 Acial 12 ( m) Infosys SQS m # 8 HCL 310 World market for software quality services: $15 to $17bn * ** 48% in US, 33% in Europe, 20% RoW ** Expected CAGR of ~ 8% * ( m) CGI HP Tech Mahindra ,000 Source: *Nelson Hall Report, 2014/2016; **Gartner 2016; SQS, based on estimated or published 2015 revenue figures SQS Software Quality Systems AG Results for the 12 months ended 31 December March

7 Revenues in m Financials SQS Software Quality Systems AG Results for the 12 months ended 31 December March

8 Financial Highlights FY 2015 Grew top line and MS/Specialist contribution, strong cash conversion. in m FY 2015 FY 2014 Change Main developments Revenue % Adj.* Gross Margin (%) 31.5% 33.4% -190 bps Adj.** PBT % Cash Flow from Operations 31.4m 26.6m 18% Organic growth +7.5%, acquisitive growth from three completed acquisitions Depressed by lower RTS margin, share of segment has been reduced in H2 Reflects lower overhead costs at 24.7% (FY 2014: 26.0%) Represents a 110% EBITDA to operating cash flow conversion Adj.*** Earnings per Share ( ) **** -2.4% Net Debt/Net Cash (5.9)m 9.8m -15.7m Reflecting higher local tax rate at 31.8% and higher minority interests Reflects cash out of 18.0m for acquisitions and 4.4m for test centre building * adjusted for a non-cash amortisation of Bitmedia/Trissential acquired order backlog of 2.1m ** incl. effects under * and adjusted to add back 6.9m of IFRS amortisation of client relationship assets from the Bitmedia/Trissential acquisitions, 1.2m acquisition costs for Bitmedia, Trissential and Galmont and 0.4m pro forma interest arising from purchase price allocation for deferred payments on acquisitions *** adjusted to add back effects under ** at actual local GAAP tax rate of 31.8%, less 1.9m on minority interests (mainly for SQS India BFSI) **** originally published 0.43, after correction of minority interests it is now 0.41 SQS Software Quality Systems AG Results for the 12 months ended 31 December March

9 Gross Margin Contribution by Business Line FY 2015 RTS share of Group revenue substantially reduced through focus on higher margin business. Revenue ( k) 48% of total 11% of total 31% of total 10% of total (2014: 45%) (2014: 8%) (2014: 38%) (2014: 9%) 320, ,201 99,251 36,644 31,620 MS incl. coops Specialists Regular Testing Services Other (non- MScontractors, T&C,Tools) Total Gross Margin as % of revenue 36.5% 34.1% 26.5% 19.8% 31.5% (2014: 36.8% ) (2014: 35.2%) (2014: 32.3%) (2014: 19.7%) (2014: 33.4%) Overhead as a % of revenue Adj. EBIT as % of revenue 24.7% 6.8% SQS Software Quality Systems AG Results for the 12 months ended 31 December March

10 Revenue Split Continued diversification in verticals and regional split. FY 2015 Revenue: m (+19.5% YoY) Revenue by industry Revenue by geography Government & Public Telecommunication Energy & Utilities Other 6% 4% 8% 7% Manufacturing Focus verticals 11% (-1%)* 13% (-2%)* 35% (-3%)* Banking & Financial Services 16% (-)* Insurance Retail, Logistics & Services * Change to FY 2014 Benelux + Ireland + Austria Switzerland - - Nordic o 6% 9% Rest of Europe 4% + 5% 4% 10% Rest of World (ASIA/SA/ME) o 5% 12% USA + 30% 15% Germany UK - - +/- Change to FY 2014 SQS Software Quality Systems AG Results for the 12 months ended 31 December March

11 Further Financial Metrics 22.4m investment cashout for acquisitions/test centre expansion partly funded by strong operating cash flow. Net Debt/ Net Cash (in m ) 0 Number of clients / Average revenue FY k -7.9 FY k k 335k 634k -2.9 FY 2014 FY FY Capex 18.0m 4.4m Acquisitions SQS India Test Centre SQS Software Quality Systems AG Results for the 12 months ended 31 December March

12 Rest of Europe Rest of World Germany Nordic 30% Austria Revenue share by geography Benelux Ireland 9% 10% Switzerland 12% USA 15% UK Summary and Outlook SQS Software Quality Systems AG Results for the 12 months ended 31 December March

13 Outlook We enter 2016 with cautious optimism and look forward to another year of progress. Continue to strengthen the strategic fundamentals of our business Industrialised Managed Services make up more than 50% of total revenues going forward Continue to grow Specialist Consultancy Services. Reduce exposure to lower margin Regular Testing business Reduce client numbers, overheads and headcount RTS to drop below 30% of total revenues Finalise integration of US operations and expand US footprint Build out our position as the leading specialist quality assurance services provider for end-toend business processes SQS Software Quality Systems AG Results for the 12 months ended 31 December March

14 Other 10% Regular Testing Services 31% Revenue share by business lines 11% Specialists 48% Managed Testing Services Appendix SQS Software Quality Systems AG Results for the 12 months ended 31 December March

15 Profit & Loss Statement Revenue up by 19.5% YoY. Gross Margin down by 190bps. Overhead costs down from 26.0% to 24.7% of revenue. in 000 YE 2015 HY 1/2015 HY 2/2015 Change YE 2014 in % of sales in % of sales in % of sales 2015/2014 in % of sales Revenue 320, , , % 268,483 Adj. Gross Profit 100, % 46, % 53, % 12.8% 89, % G&A S&M R&D EBITDA Depreciation 52,353 22,873 3,970 28,598 6, % 7.1% 1.2% 8.9% 2.1% 24,816 10,897 1,712 12,624 3, % 7.3% 1.1% 8.4% 2.0% 27,537 11,975 2,259 15,974 3, % 7.0% 1.3% 15.7% 10.4% 4.1% 9.4% 10.8% 12.6% 45,250 20,720 3,815 25,820 6,049 Adj. EBIT 21, % 9, % 12, % 10.2% 19, % Net interest financial -1, % -1,049 Exchange rate loss/gain % 66 Adj. PBT 20, % 8, % 11, % 11.0% 18, % 16.9% 7.7% 1.4% 9.6% 2.3% IFRS regular amortisation on acquisitions Acquisition costs and IFRS pro forma interests on PPA and pensions -8,942-1,631-3, ,797-1,001-8, PBT 10, % 5, % 5, % 1.4% 10, % Taxes -3,049-1,316-1, % -3,266 Profit after taxes 7, % 3, % 3, % 5.3% 6, % SQS Software Quality Systems AG Results for the 12 months ended 31 December March

16 Balance Sheet Debtor days (receivables and WIP) at 69 (FY 2014: 72). in 000 YE 2015 YE 2014 Assets Non current assets 141,838 87,910 Net debt at (5.9)m Equity and Liabilities Net assets = 46% of balance sheet total Goodwill Intangible assets Other assets (e.g. fixed assets, financial assets) 92,539 26,586 22,713 55,836 18,470 13,604 Current assets 116,392 96,073 Cash and cash equivalents Trade receivables Work in progress (mostly on MS contracts) Other receivables (e.g. tax receivables) 31,990 61,093 16,074 7,235 26,297 57,995 7,736 4,045 Total assets 258, ,983 Current liabilities 97,763 51,111 Bank loans & overdrafts Trade creditors Other short term liabilities Tax accruals and liabilities 27,064 10,517 49,294 10,888 5,463 10,763 24,731 10,154 Non current liabilities 41,130 28,996 Bank loans Long term liabilities for acquisitions Other non current liabilities (mainly deferred tax liabilities) 10,825 15,421 14,884 11,000 7,977 10,019 Equity/Net Assets 119, ,876 Total liabilities 258, ,983 SQS Software Quality Systems AG Results for the 12 months ended 31 December March

17 Cash Flow Statement Operating cash flow at 110% EBITDA conversion. in 000 YE 2015 YE 2014 Net cash flow from SW, computers, Unit 3 Pune, PractiQ, SQS- TEST /Professional Cash part of IT and US acquisitions; 2014: acquired cash from SQS India BFSI consolidation Payment to SQS India BFSI minority shareholders Operating activities 31,445 26,623 Interest payments Tax payments -1,260-8,107-1,467-5,594 Current business activities 22,078 19,562 Acquisition and capitalization of tangible / intangible assets (w/o goodwill) Acquisition of subsidiaries Foreign currency result / interest received -12,353-17, ,956 7, Investment activities -29, Dividend payments Increase of capital Payment for acquisition of non controlling interests Dividend payments to minorities Net change of finance loans Redemption / termination of leasing contracts -3, ,979 18, , , , Financing activities 12,205-8,836 Changes in cash due to forex 1, Cash at beginning 26,297 15,248 Cash at end 31,990 26,297 SQS Software Quality Systems AG Results for the 12 months ended 31 December March

18 Earnings per Share (EPS) Adj. EPS lower due to higher tax rate and minorities. in 000 FY 2015 FY 2014 Change PBT reported 10,270 10, % IFRS regular amortisation on acquisitions Acquisition costs and pro forma interests on PPA/pensions Taxes on income of operations local GAAP Minority interests (mainly India BFSI) 8,942 1,631-6,632-1,934 8, ,954-1,404* Profit after taxes adjusted 12,278 12, % Weighted average number of shares undiluted 31,003,989 30,562,679 EPS adjusted in * -2.4% * originally published 0.43, after correction of minority interests it now is 0.41 SQS Software Quality Systems AG Results for the 12 months ended 31 December March

19 Backup Other short term liabilities YE 2015 in 000 YE 2015 Accruals Bonus 10,574 Holiday 5,432 Outstanding invoices 4,436 Personnel (travel/partial retirement) 2,393 Social securities 877 Other 1,858 Audit 325 Warranties 0 Sub-total 25,895 Other liabilities Social securities 2,552 Current liabilities other (travel/rent/vat) 2,680 Leasing 62 Wages/travel 1,330 Short term acquisition (Pune/Trissential) 15,607 Liabilities against shareholder BFSI 40 Sub-total 22,271 Accrued Expenses Deferred income 1,128 Total 49,294 SQS Software Quality Systems AG Results for the 12 months ended 31 December March

20 Backup Goodwill & Intangibles YE 2015 in 000 Goodwill Intangible assets (e.g. client relationship) UK 31,459 31,459 Triton 9,100 9,100 India (Pune) 12,235 12,235 BFSI India (Chennai) 4,482 6,647 11,129 Nordic 2,874 2,874 Netherlands Italy 1,524 3,139 4,663 Trissential 15,103 8,085 23,188 Galmont (PPA still pending) 14,974 14,974 Other companies Sub-Total 92,539 17, ,410 Software (SAP/Microsoft) 3,381 3,381 R&D (SQS Tools)/ PractiQ 5,334 5,334 Total 92,539 26, ,125 Total SQS Software Quality Systems AG Results for the 12 months ended 31 December March

21 Managed Services Order Intake Record order intake of 164m from 9 new MS clients and contract extensions. Order intake 164m 142m 112.5m 101m 66.5m 51m 10m SQS Software Quality Systems AG Results for the 12 months ended 31 December March

22 Shareholders Our largest institutional shareholders hold about 57% of SQS issued shares. Major Institutional Shareholders > 1% Octopus Investments 12.7% Herald Investment Management 6.0% Miton Asset Mgmt. 5.9% Schroder Investment Management 4.8% Legal & General Investment Management 4.6% BlackRock Investment Management 4.3% Charles Stanley 2.9% Standard Life Investments 2.4% Henderson Global Investors 2.2% JO Hambro Capital Management 2.0% Investec Asset Management 1.8% British Airways Pensions 1.8% Brooks Macdonald Asset Management 1.8% Rathbones 1.7% Hargreave Hale 1.4% Allianz Global Investors Europe (Germany) 1.0% Sub-Total 57,3% Individual Shareholders Founders (van Megen/Bons) 25.0% Earn Out Shareholders/Employees 3.2% Sub-Total 28.2% Source: Share Register Analysis, Numis Securities Limited, 1 st December 2015 SQS Software Quality Systems AG Results for the 12 months ended 31 December March

23 Issued Share Capital The number of shares in issue will continue to increase from consideration shares from acquisitions. Actual and estimated weighted (undiluted) average number of shares in issue: ,893k shares (actual) ,211k shares (actual) ,563k shares (actual) + (2,099k weighted stock options) ,003k shares (actual) + (2,270k weighted stock options) ,676k shares (forecast) + (2,350k weighted stock options) ,300k shares (forecast) + (2,400k weighted stock options) SQS Software Quality Systems AG Results for the 12 months ended 31 December March

24 About SQS SQS runs ten off- and near-shore Global Delivery Centres with more than 2,000 employees. Chennai I, India Chennai II, India Durban, South Africa Pune, India Cairo, Egypt Belfast, UK Güssing, Austria Mumbai, India Görlitz, Germany Lexington KY, USA SQS Software Quality Systems AG Results for the 12 months ended 31 December March

25 Thank you for your attention SQS Software Quality Systems AG Results for the 12 months ended 31 December March