Dear Ladies and Gentlemen,
Software AG maintained its profitable growth trend in early fiscal 2008. Despite the slowing economy, we continued to experience stable IT demand in our market segment of infrastructure software for business customers. Our US business was particularly robust: we met all of our targets there during the first quarter in both divisions, and are confident of further positive performance in this market.
What were the highlights of the first quarter? We continued to grow, despite difficult macroeconomic conditions. The strongest drivers of this growth were our outstanding product portfolio in both divisions and our ongoing geographic expansion, as well as our positioning as a technology leader at CeBIT. All of these factors, together with yet another increase in profitability, leave us confident of further growth in the current fiscal year.
Increases in revenues in all segments
We enjoyed growth in all revenue segments in the first quarter of 2008 compared to 2007. In the ETS Division, we were able to report continuous positive business performance worldwide. The constant growth in licensing revenues at ETS provides Software AG with a profitable core business. The maintenance business also turned in a positive performance. This reflects the restructuring and efficiency enhancement measures introduced in recent months. With operating revenues of €91.1 million, ETS has doubled its sales in five years, and is now helping customers adapt to the future with its modern products, while also making a positive contribution to the future of Software AG.
We have similarly been able to successfully build webMethods into a second division. This has brought our company into the top tier of the integration software market. The webMethods Division turned in a strong performance in its domestic market in the USA, our most important individual market, during the first quarter. We still have some work to do, however, in EMEA and Asia. Our successes from the USA should help in these regions over the coming months. We have already introduced the necessary measures.
Total currency-adjusted group revenue increased by 37 percent compared to the same quarter of the previous year, to €159.4 million compared to €124.7 million in Q1 2007.
Particularly strong growth in profitability
The trend in profitability was particularly encouraging. Thanks to significantly improved economies of scale in the wake of the acquisition of webMethods Inc., increased process efficiency, and the effects of synergies, we were able to increase our EBIT by 44 percent to €36.0 million and our EBIT margin from 20.0 percent to 22.6 percent. Earnings per share rose to €0.79, a new record for the first quarter, and a figure that provides us with a solid foundation for achieving our targets for the year.
Successful entry into the Brazilian market
One of the growth engines for Software AG’s business is growth through geographic expansion. Our goal is to increase revenues by replacing indirect sales through distributors with a direct market presence in Israel, Venezuela, South Africa, Japan, and Brazil. Other Latin American countries are to follow. We are also planning to expand in the burgeoning markets of countries in the Near East, Eastern Europe, and Russia.
With regard to this direct entry strategy, I would like to make a few brief points about the Brazilian market in particular: As a prerequisite for this market entry, we won all court proceedings in the first instance, and have been directly represented in Brazil by an expert team since the beginning of the year. More than 150 companies and public institutions already use Software AG products. We signed our first major maintenance contract in April. Because the potential in Brazil is even higher than originally assumed, we have increased our projections for total revenue from Brazil in 2008 from US$25 million to US$30 million.