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89 percent increase in operating profit
Lower costs as a result of restructuring helped to lift profitability. Strict cost management reduced other operating costs by €10.6 million.

As a result, earnings figures, reported for the first time in accordance with International Financing Reporting Standards (IFRS), improved significantly. Earnings before interest and tax (EBIT) rose to €15.1 million, an increase of 89 percent. This is equivalent to an EBIT margin of 16 percent.

Pre-tax profit rose to €15.8 million, in comparison to a loss of –€23.1 million in the same period of 2003 (largely a result of restructuring costs of €31.8 million). Net income for the quarter totaled €9.8 million, contrasting with a loss of –€14.8 million in the first quarter of fiscal 2003. This represents earnings per share of €0.36 (–€0.54 in Q1 2003). Fluctuations in currency rates have less impact on profitability than on revenues, since a significant proportion of costs are also posted in US dollars, and hedging is employed to shield forecast earnings from the potentially negative impact of significant changes in exchange rates.

Further increase in equity-to-assets ratio
Software AG has further improved its financial footing. Shareholders’ equity increased to €286.8 million from €242.3 million in the first quarter of 2003. As a result, the equity-to-assets ratio improved further, reaching 54.8 percent.

Cash and cash equivalents increased from €80.9 million in the first quarter of 2003 to €83.1 million. Assets rose to €256.6 million, primarily as a result of improved valuations for financial assets. Despite an increase in restructuring payments of €6.4 million, cash flow from operating activities totaled €10.7 million in comparison to €12.0 million in the first quarter of 2003.

As a result of the adoption of International Financial Reporting Standards (IFRS), goodwill was frozen at €176.5 million on January 1, 2003 (the date of the changeover from HGB to IFRS). Therefore goodwill rose by €22.0 million on December 31, 2003 (i.e. the amount amortized one year previously).

  Interim Report Q1/04 (PDF)
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