Software AG reports significant profit improvement in 2004
Darmstadt, Germany, 2/15/2005
Software AG announced a successful financial turnaround in 2004. Revenue was EUR 411.4 million, a slight increase over 2003, at constant currency rates. License revenue increased by 9.5 percent, net of currency effects 11 percent. Total product revenue was up 4 percent to EUR 296.8 million, net of currency effects. Operating EBIT increased by 42 percent to EUR 83.9 million with a 20.4 percent revenue margin. Software AG increased profit before tax to EUR 111.7 million. This included extraordinary income of EUR 24.5 million from the sale of SAP SI shares. Net income increased significantly to EUR 77.2 million compared to EUR 7.1 million in 2003. Earnings per share were EUR 2.83, compared to EUR 0.26 in 2003, including EUR 0.88 from the SAP SI shares.
The company will recommend a dividend payment of EUR 0.75 at the Annual Shareholder’s meeting. This is a dividend yield of 3.25 percent based on the average 2004 share price.
Fourth quarter revenue and earnings figures were in line with the annual figures. They showed stable revenue, at constant currency rates, of EUR 112.8 million, an operating EBIT of EUR 23.6 million and net income of EUR 15.3 million, compared to EUR 4.2 million in Q4, 2003.
View detailed Q4 results here.
Stable Revenue
The company posted revenue of EUR 411.4 million, for the
full year, compared to EUR 420.0 million in 2003 including a total
currency effect of EUR 10.6 million. Sales volume in local currency
increased by EUR 2 million, a 0.5 percent increase. Product revenue
was increased by 4 percent, net of currency effects, to EUR 296.8
million, driven by a 11 percent increase in license revenue. Both
business lines increased license revenue Enterprise Transactions
Systems by 14 percent and XML Business Integration by 2
percent, both net of currency effects. Professional services
returned revenues of EUR 112.8 million (8 percent down on
2003).
Operating EBIT up 42%
The company reduced operating expenses, (cost of sales
plus R&D, administration and sales/marketing expenses), by 13
percent to EUR 320.8 million (EUR 368 million in 2003). This
allowed Software AG to return a 42 percent increase in operating
profit (operating EBIT) of EUR 83.9 million. The operating EBIT
margin was 20.4 percent. There was amortization write down of EUR
1.9 million, the remaining goodwill from the acquisition of the IC
Group in Holland in 2001.
Profit before tax was EUR 111.7 million (EUR 13 million in 2003), including EUR 24.5 million from the sale of SAP SI shares. The company posted net income of EUR 77.2 million as compared to EUR 7.1 million in 2003.
Earnings per share were EUR 1.95 based on operating results plus EUR 0.88 through the sale of SAP SI shares giving a total of EUR 2.83 per share.
Solid Balance Sheet
Cash and cash equivalents rose to EUR 119.1 million (74.1
million in 2003). Software AG continues to have no bank liabilities
and has unused credit lines at its disposal. Total assets rose to
EUR 510.7 million, EUR 505.6 million in 2003. Trade receivables
remained at EUR 124 million. The equity-to-total-assets ratio rose
to 63 percent, the highest since the initial public offering in
1999.
Healthy cash flow
The operating cash flow more than doubled to EUR 28.9
million (EUR 13.5 million in 2003) with free cash flow more than
trebling to EUR 22 million (EUR 5.9 million in 2003).
Allowing for the reversal of factoring and the cash-out of
re-structuring charges, Software AG returned an organic cash flow
of EUR 54.7 million (EUR 55.1 million in 2003).
The recommended dividend payment is EUR 0.75 per share, a yield of 3.25 percent based on the average 2004 share price.
The effective headcount dropped between the 31st of December 2003 and the 31st of December 2004 from 2,577 to 2,438.
Successful strategy implementation
The implementation of the strategy, initiated by CEO, Karl-Heinz
Streibich, in December 2003, was started in the first quarter 2004.
The concentration on Software AG’s core competencies
“High-performance databases with user-friendly programming
languages (Adabas and Natural)” and “Integration of an enterprise’s
existing applications using Software AG’s XML expertise” resulted
in the foundation of the business lines, Enterprise Transaction
Systems and XML Business Integration. This also considerably
expanded Software AG’s added value.
Development and sales of non strategic products and solutions was stopped. Concentrating on two core areas led to the dissolution of some units within the company. At the same time, Software AG strengthened the personnel structure in customer-oriented areas.
The country subsidiaries were focused on both business lines as was Research and Development.
Software AG instituted an executive customer visit program. This program has opened the doors to customer’s decision-makers. In addition this program raised the overall awareness of Software AG within the customer base.
Modernizing the product portfolio
Software AG’s Research and Development concentrated on the products
and solutions that best meet the customers’ expectations. In
addition the company internationalized locally developed vertical
industry solutions.
Geographical consolidation
Software AG restructured its originally four regions into three,
based on language and cultural similarities.
The Anglo-American zones and Northern Europe make up one region.
Southern Europe and Latin America are in another region. First successes with this organization resulted in contracts with the government of Chile three months after the restructuring.
Based on market demands of eastern emerging markets rather than language, Software AG grouped the Central and Eastern European states, APEC member states, and Russia.
These changes allowed a successful financial turnaround and positioned Software AG for growth in 2005.
Outlook 2005
Software AG expects revenue growth in the range of four to
six percent, net of currency effects. The ETS business line is
expected to return stable revenue with growing revenue from the XML
Business Integration solutions, primarily in the second half of
2005.
The operating EBIT margin is expected to be between 20 to 22 percent in 2005.
Free cash flow of around 2 Euros per share is also expected.
Further strategic developments are planned to expand the product portfolio including acquisitions and partnering.
The acquisition of Sabratec was completed in February adding a strategic technology offering to the legacy modernization and integration portfolio.
View detailed Q4 results here.
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Contact: Software AG Susanne Eyrich VP Corporate Communications Uhlandstr.12 64297 Darmstadt Germany Tel: +49 6151 92-1511 Mobile: + 49 170 4522702 Fax: +49 6151 92-1621 press@softwareag.com http://www.softwareag.com |
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