SAS cashes in on larger rivals' margin pain

Managed services player posts buoyant Q3 numbers and claims bigger SIs are having to swallow 40 per cent cost reductions

Hosting and services player The SAS Group claims it is nabbing business from beleaguered bigger rivals after posting tasty increases in profit and sales during its third fiscal quarter.

For the three months until 31 May, the Horsham-based firm posted sales of £2.6m, a rise of 20 per cent on the corresponding period last year. Gross margin was more or less flat at 34 per cent, but net income spiked by a third year on year to £370,000.

SAS chief executive Charles Davis indicated that the Q3 results are in line with his firm's projections, adding that full-year growth is forecast at 25 per cent. He claimed bigger rivals are struggling to swallow the pressure currently being put on margins.

"Trading conditions are quite challenging for the larger managed service providers at the moment," said Davis. "A lot of our competitors are experiencing delivery stress as their customers demand the same or higher levels of service for less cost.

"The challenges of managing 30 to 40 per cent price reductions in voice and data charges, as well as the pressure on hardware and software margins from cloud-based opex models, means that larger carriers, systems integrators and outsourcers do not have a lot of margin within their cost models to play with. Subsequently, customers are increasingly looking to specialist companies such as SAS, who can offer the level of flexibility they require."