Software AG: Stable Performance Continues in Q2 2009
Published: 7/22/2009
- Group revenue rises 5 percent to €176.4 million
- Product revenues increase 9 percent to €133.7 million
- Free cash flow improves by 30 percent to €29.8 million
- EBIT margin up from 24.3 to 25.1 percent
- Takeover bid for IDS Scheer: Majority stake secured
- Change of 2009 outlook announced due to takeover
Software AG (Frankfurt TecDAX: SOW) continued to deliver a solid performance in the second quarter of 2009. Group revenue was €176.4 million, a 5 percent rise year on year (Q2 2008: €168.8 million). The high-margin product revenue (licenses and maintenance) increased by a total of 9 percent to €133.7 million (Q2 2008: €123.2 million), more than offsetting the weaker performance of the service business (down 7 percent from Q2 2008). These figures demonstrate that the company is continuing its profitable growth. Operating earnings (EBIT) improved by 8 percent to €44.2 million (Q2 2008: €40.9 million). Free cash flow rose 30 percent in the second quarter, up from €23.0 million to €29.8 million. In connection with the takeover bid for IDS Scheer AG, Software AG has already acquired more than 10 percent of IDS Scheer AG’s stock on the open market. Subject to antitrust approval, this means that including the 48 percent stake contracted with the principal shareholders, Software AG will become the majority shareholder. As a consequence, the proposed acquisition will alter the existing forecast for the current fiscal year.
In the second quarter of 2009, Software AG continued its stable performance despite the persistently difficult economic environment. Unlike many competitors, the company maintained its solid growth due to its robust business model and broad global presence. In particular, this growth resulted from the continuous expansion of the maintenance business with Software AG’s stable customer base. This area improved by 20 percent to €73.9 million in the reporting period (Q2 2008: €61.8 million). However, the acquisition of new projects from new customers remained difficult in the second quarter. Nonetheless, licensing revenues were nearly at the same level as in the prior year at €59.8 million. At €41.7 million, revenue from Professional Services was down 7 percent year on year (Q2 2008: €44.8 million). This reflects the trend in the IT services industry, but had only a marginal effect on Software AG’s earnings.
The webMethods business division saw further confirmation that new projects and customers are harder to come by in the current market environment, in particular in countries where Software AG is lacking sufficient market presence. Critical size and an in-depth understanding of customers are two important advantages for sustained project success in the webMethods business. In the second quarter of 2009, the revenues from the webMethods activities remained at €75.5 million, roughly the same level as in the prior year (Q2 2008: €76.7 million). The weaker project business was compensated by increased product revenues.
Thanks to the favorable upward trend in Brazil, revenues improved in the ETS business, rising 10 percent from €92.1 million in the second quarter of 2008 to €100.9 million. This was significantly supported by maintenance revenues, which increased by 19 percent to €46.7 million (Q2 2008: €39.3 million). ETS contributed 57 percent of total revenues in the reporting period (webMethods 43 percent).
