SQS AG increases profits by 44 per cent

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Operating result for the 2006 financial year

Cologne, 22 March 2007

SQS Software Quality Systems AG (AIM: SQS.L, Entry Standard: ISIN DE0005493514) increased both sales and profits by some 44 per cent in the 2006 financial year. Sales amounted to 78.9 million euros last year, while adjusted profits before tax grew to 5.3 million euros.

The strong growth was partly the result of an increase in orders in SQS’s core business, i.e. software quality management and testing. At the same time, SQS AG was able to expand its business further through the purchase of the British company Cresta Ltd. in May of last year. Organic growth in sales not including the corporate acquisition was about 18 per cent, and thus almost four times the average rate of growth in the European IT service market.

The results from the 2006 financial year (ending on 31 December 2006):

• - Sales rose by 44.2 per cent to 78.9 million euros (2005: 54.7 million).
• - Adjusted profits before tax were increased by 44.0 per cent to 5.3 million euros (2005: 3.7 million).
• - Adjusted earnings per share recorded a rise of 27.3 per cent to 28 cents (2005: 22 cents).
• - Underlying cashflow was consistently strong.
  
  “At the time of our listing on the London Alternative Investment Market, AIM, in September 2005 we had planned to double sales within two years”, says Rudolf van Megen, CEO of SQS AG. “Thanks to our strong organic growth and the purchase of Cresta last year we are well on the way to achieving that target.”
  Sales revenue from customers making repeat purchases from SQS accounted for 75 per cent of total sales last year. SQS was able to achieve the 2006 results on the basis of the current total of about 400 customers. About a quarter of this clientele were new additions for SQS in 2006. In order to satisfy the greater demand for services surrounding software quality management and testing, SQS recruited more than 100 additional specialised advisers.
  In operational business the company primarily increased the number of outsourcing projects, for which the company’s own offshore capacities were available for the first time last year, in the form of the new subsidiary establishment in South Africa. The majority of the seven customer contracts that SQS has been engaged in for many years also include offshore components.
  To enable SQS to register similar rates of growth in 2007 to those achieved in the previous financial year, the company concentrated its investment mainly in four growing markets in 2006:

• Firstly SQS continued expanding its own outsourcing business for software testing.
• Secondly SQS increased its market share in testing software for embedded systems in manufacturing industry.
• Thirdly the company acquired its own centre for offshore testing in South Africa.
• Fourthly the specialist consultants began offering a new set of consulting services through SQS Business Consulting, which builds bridges between those responsible in the company for technical questions and IT.
• SQS Software Quality Systems
  SQS is the leading independent provider of software quality management and testing services in Europe. Based in Cologne, Germany, SQS currently employs more than 850 people in its branches in Europe—including the United Kingdom, the Netherlands, Switzerland, Austria and Ireland—and South Africa. SQS also has a minor stake in an operation in Portugal and a cooperative agreement with a company in Spain.
  SQS is the first German company to have a primary listing on AIM (Alternative Investment Market) in London. SQS completed a secondary listing on the Entry Standard of the Deutsche Börse (German Stock Exchange) in Frankfurt am Main on 2 December 2005.
  With over 4,000 successfully completed projects behind it, SQS has a strong customer base including half of the DAX 30 companies and 30 per cent of the companies in the STOXX 50. They include names like Dresdner Bank, Barclays, Deutsche Telekom, BP, DaimlerChrysler and Airbus, and various other enterprises from all business sectors.