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).