SQS Software Quality Systems' shares fall on US growth caution

Shares in SQS Software Quality Systems are down more than 11% after it flagged an expectation of subdued growth in the US market, but anticipated growth in German-speaking countries, UK, Ireland and Italy.

Current trading, it said, however, and ongoing strategic developments were in line with management expectations following recent significant contract wins.

Chief executive Diederik Vos described the results as strong, including the highest pre-tax profit margin since the global financial crisis. SQS had entered 2017 with confidence, he said.

"In line with economic forecasts, we expect to see growth particularly in the German speaking countries, the UK, Ireland and Italy," Vos added in a statement.

"We expect growth of the overall US market to be relatively subdued following recent policy changes such as on health insurance."

Vos noted the US was the world's largest IT market, and, given the progress SQS had made after the integration of its acquisitions there, it was well positioned to address growing market share there over the next few years.

"Though it is too early to tell, the well-documented recent issues for a number of large IT outsourcers operating in the US could create opportunities for SQS," Vos said.

He concluded that SQS was reassured by the continuing momentum within its existing, globally diverse client base.

"Our evolving product and service offering are also opening up new opportunities for higher margin client engagements. We have a solid pipeline and the Board believes it is well positioned to deliver further growth in the year ahead."

At 12:41 GMT, shares in AIM-quoted SQS were down 11.01% to 557.5p each.