Software AG continues profit and margin growth in second quarter 2005
Operating income (EBIT) raised by 13% to €44.4 million in the first six months
Darmstadt, Germany, 7/28/2005
Software AG (Frankfurt TecDAX: SOW), today announced its results for the second quarter ended June 30, 2005 and for the first six months of the running fiscal year. The operating income (EBIT) for the first six months amounted to €44.4 million, up 13% over the €39.4 million for the year-ago period. The operating margin for the first half-year of 2005 was 21.1 %, up 160 basis points in comparison with the year-ago period. The improvement in operating income was driven by higher revenues which rose to €210.8 million in the first six months of 2005 compared to €202 million for the year-ago period, up 5% at constant currency rates. The increase in revenue resulted from strong license sales which rose 13% on a currency adjusted basis to €59.1 million from €52.6 million for the comparable period of 2004. The Enterprise Transaction System (ETS) business line followed an upside trend due to strong license developments in both quarters of 2005, and XML Business Integration continued its strong growth with Software AG’s own products returning a 31% increase in license revenue.
View detailed Q2 results here.
Double-digit revenue growth for Software AG’s XML
products in the first six months 2005
Total license revenue for the first half-year was €59.1 million, up
12% over the €52.6 million of the year-ago period (13% at constant
currency rates). License revenue for ETS increased 9% to €43.9
million, underlining the continuing upside potential of the
business line. License revenues for Software AG’s own XML
Integration products were €11.4 million in the first six months, a
very strong increase of 31%. The license revenue of third party XML
integration products was reduced as planned by 17% to €2.4 million
in the first half-year 2005. Revenue for maintenance was €89
million in the first six months of 2005, in comparison with €90.9
for the year ago period, a decline of 2% net of currency effects.
Revenue for professional services was €61.6 million, up 7% from the
€57.6 million for the first half-year of 2004.
Continued improved operating margin through sustained
cost management
The improvement in operating margin to 21.1%, in comparison to
19.5% in the year-ago period, reflects the company’s continued
success in maintaining cost discipline while investing in the
expansion of the business. Total operating expenses for the first
six months were €95 million, in comparison with €93.6 million in
the year-ago period, an increase of 1.5%. This increase in
operating expenses is a result of planned investments in customer
focused activities within the sales and marketing
departments. While ensuring cost discipline, the company
continued its growth strategy by introducing new products, entering
new geographical markets, and developing its network of
partnerships. The total number of employees at June 30 was 2,578
(in comparison with 2,435 a year ago), of which 70% are working
outside Germany, reflecting the company’s focus on expanding its
business geographically while managing its cost base.
Net income and earnings per share before extraordinary
income increased by 11%
Net income before extraordinary items rose in the first six months
of 2005 to €27.7 million, an increase of 10% over the previous
year’s period. Earnings per share before extraordinary items was
€1.02, also up 11% over the first six months of 2004. “The results
for the first six months show that we are indeed well on our way to
achieving our objectives for the current year,” said CEO Karl-Heinz
Streibich. “Our consistent growth, combined with the investments we
are making in expanding our geographic reach and our product
portfolio, are laying the groundwork for accelerated growth
opportunities in 2006 and beyond.”
Strong balance sheet, sustained positive cash
flow
Total shareholders’ equity as of June 30, 2005 was €334.4 million,
an increase of 10.9% from the €301.6 million a year ago. The equity
to assets ratio rose to 62.6% from 57%. Cash and cash equivalents
were €128.8 million, up 16.6% from €110.5 million, and after a
€20.5 million dividend pay-out. The improvement in the balance
sheet ratios reflected the company’s sustained strong operating
cash flow which for the half of 2005, amounted to €38.5 million,
compared to €13.1 million for the year-ago period. This financial
strength gives the company the flexibility to pursue its long-term
business strategy including, as appropriate, the pursuit of
targeted acquisitions.
Second quarter 2005 in reviews: Operating income up by
10%
In the second quarter, operating income (EBIT) was €26.5 million,
an increase of 10% over the €24.2 million (net of extraordinary
income) for the corresponding period of 2004. The operating margin
(EBIT as a percentage of revenue) for the second quarter was 24%,
in comparison with the 22.8% margin recorded in the second quarter
2004. The continued improvement in operating income was driven by
higher revenues, which rose by 4 %, (or 5 % on a currency adjusted
basis), to € 110.5 million from €106.3 million for the year-ago
period. The increase in revenues reflected continuing growth in
license and service revenue, both up 10% at constant currency
rates.
Region South (Southern/Western Europe and Latin America) saw the most dynamic growth during the second quarter 2005, with revenue of €36.6 million, an increase of 10.6% from the year-ago period. This development is driven by the expanding business of Software AG in Latin America. The Northern Europe and USA segment saw revenue of €45.2 million in the second quarter, nearly unchanged in comparison to the year-ago period (€45.8 million). The high profitability of the region was even further increased. The third geographical region, Central/Eastern Europe and Asia, recorded revenue of €29 million (up 5.5%) in the second quarter of 2005, which was driven by significantly increased license and professional service revenue.
Net income before extraordinary items rose to €16 million in the second quarter 2005, an increase of 4% over the previous year’s period. Earnings per share before extraordinary items were €0.59, up 3 euro cents over the second quarter of 2004. (In the second quarter of 2004, the company realized an extraordinary net profit of €24 million from the sale of its stake in SAP SI which reduced the operating net income to €39.4 million.
Outlook
The company confirms its outlook for 2005. Accordingly, Software AG
continues to expect revenue growth for the entire year in the range
of four to six percent, net of currency effects. The company also
continues to project an operating EBIT margin for the year 2005
between 20 and 22 percent.
Software AG provides a real-time single view of strategic business information by integrating applications and systems, in addition to modernizing mainframe and open system IT environments. Its offerings are based on the product families Adabas, Natural, EntireX and Tamino. Around 2,500 employees in 59 countries support the mission-critical systems of 3,000 customers around the world. The company maintains five R&D facilities across three continents. Founded in 1969, Software AG today is Europe’s largest and most established systems software provider. It is headquartered in Darmstadt, Germany and is listed on the Frankfurt Stock Exchange (TecDAX, ISIN DE 0003304002 / SOW). In 2004 Software AG posted 411 million euros in total revenue.
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Contact: Software AG Paul Hughes Director Media Relations Uhlandstrasse 12 64297 Darmstadt Germany Tel: +49 6151 92-1787 Fax: +49 6151 92-1623 press@softwareag.com http://www.softwareag.com |
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or: Software AG Otmar Winzig Senior Vice President Investor Relations & Compliance Uhlandstrasse 12 64297 Darmstadt Germany Tel: +49 (0) 6151-92-1669 Fax: +49 (0) 6151-92-34-1669 press@softwareag.com http://www.softwareag.com |
