Strong contract wins helped AIM-listed firm hit expectations
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UK software firm SQS (LON: SQS) has released a solid trading update for the year ending 31 December, showing profit in-line with expectations after several significant contract wins.
The company says it expects profitability for the period to be in line with its own projections after making solid strategic and financial progress. It ended the period with strong profit to cash conversion and net debt of €12m.
SQS management focused on higher margin clients and those with the most potential in 2016, with the strategy paying off:
"SQS has secured some substantial order intakes on digital transformation programmes across a range of sectors and geographies to be delivered over the next three years, including:
- A €30m engagement with a major global car manufacturer;
- Significant new orders and extensions from public institutions in Europe totalling €20m;
- A managed service contract with an insurance business worth €10m;
- Various multi-million US dollar orders from well known US companies across major industries."
Stockbroker Stockdale Securities said the trading update showed robust performance for the period, with profitability in line with expectations:
"Although revenue was slightly shy of our forecasts, there are a number of positives: (i) recent new contract wins look set to add around €20m annually to SQS’s revenues over coming years; (ii) net debt at the YE was sharply lower versus the interim period end and (iii) management are confident about 2017 outlook given a strong 2016 and recent wins."
CEO Diederik Vos said it had been a year of progress for SQS, with its consulting-led sales approach and focus on higher margins enabling the business to improve:
"The US continues to open up some visible opportunities for the business and the digital economy is hugely exciting. As digital transformation plays an integral role in every business, SQS' intellectual property and technology-based solutions can be applicable to any company's strategy."
Shares in SQS fell marginally as the market opened on Monday.
