A focus on larger contracts, outsourcing and offshoring has helped software testing group SQS Software Quality Systems to a strong increase in earnings in the first half of the year.
The Anglo-German AIM company lifted adjusted pre-tax profits 36.2% to €4.5m on sales up 4.9% to €107.8m in the six months to end June, in line with forecasts.
Chief Executive Officer Dik Vos, in the role for one month shy of a year now, pointed out that the group had made progress on all metrics.
SQS continued to increase the ratio of offshore to onshore staff, which helped increase margins and resulted in a 33.3% increase in earnings to €0.12 per share.
The quality of revenues has improved too, with a focus on larger contracts having led to a 15% year-on-year increase in average revenue per client during the period.
Another key revenue focus had been on increasing the proportion of managed services contracts, where companies outsource their basic testing activities to SQS, which adds strong visibility to the group's revenues.
Revenues from managed services contracts rose from €34m to €42m compared to the same period a year ago, and rose from 33% to 39% of total revenue, with gross margin on these contracts also improving from 29.9% to 33.2%.
Vos added that SQS had made an "excellent start" to the second half and had already achieved its 2014 target of 40% of revenues coming from managed services.
As per its five year plan, the company now aims to reach 50% of revenues from managed services by fiscal year 2016 and Vos said the board was confident of achieving its longer term target of becoming a €500m revenue company in 2017.
The board believes the company is well positioned to capitalise on current growth in the testing market, which it paraphrased research firm Nelson Hall in saying was being driven by "a general improvement in economic conditions, coupled with an industry trend toward the provision of testing services by independent suppliers such as SQS and away from the more traditional provision by systems integrators".
Analysts at broker Canaccord Genuity has left its forecasts unchanged but said the results provide "further evidence of the ongoing professionalisation of SQS" under Vos.
"The company has met or exceeded all the targets that the management team set out last September and it is clear that the company looks to the future, both short and medium term, with an appreciably higher degree of confidence than it did at this time last year."
Specialist house builder Mar City posted profits in line with expectations as it reported 'considerable' progress in the six months to June 30th.
Before tax, profit for the half year rose from £0.3m to £1.05m on revenues of £8.75m (H1 2012: £4.03m).
Earnings per share were 0.35p compared with 0.12p.
Since the year-end the group became a registered provider to the government's Help to Buy scheme.
Chairman Hamilton Anstead said: "The group's level of activity is increasing all the time. Profits are in line with our expectations although margins are ahead. Considerable progress has been made in the first half of 2013 and we fully expect the second half to improve again on current levels.
"Mar City is now well on its way to achieving your board's strategy of establishing the group as a leading niche independent house builder.
"Activity in the house building sector has increased dramatically in the last 12 months. In particular, the government's Help to Buy scheme is having a strong positive effect on demand for the type of housing that Mar City provides.
"We remain confident that our expertise in constructing desirable and sustainable new homes will provide many opportunities in the coming years."