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INA_CATEGORYNET_728x90 Software AG increases operating income (EBIT) by 19% to €18 million in first quarter 2005 on strengt

Software AG increases operating income (EBIT) by 19% to €18 million in first quarter 2005 on strengt


Software AG increases operating income (EBIT) by 19% to €18 million in
first quarter 2005 on strength of higher revenues and effective cost

Darmstadt / Brussels - April 28, 2005.

Software AG (Frankfurt, SOW) today announced its results for the first
quarter ended March 31, 2005. Operating income (EBIT) rose to €18
million, an increase of 19% over the €15.1 million for the
corresponding period of 2004. The operating margin (EBIT as a
percentage of revenue) for the first quarter was 18%, an increase of
more than two percentage points over the 16% margin recorded for the
year-ago period. The improvement in operating income was driven by
higher revenues, which rose by 5% (or 6% on a currency adjusted basis)
to €100.3 million from €95.7 million for the year-ago period. The
increase in revenues resulted primarily from higher license revenues,
most notably for the XML Business Integration line of business, which
the company sees as a strategic focus for growth. In addition, a
sustained focus on effective cost control allowed the company to
improve its operating margin while continuing to invest in the
expansion of its business.

Growth in license revenue driven by XML Business Integration

Total license revenues for the first quarter rose to €27 million, up
16% over the €23.3 million of the year-ago period. License revenues for
Enterprise Transactions Systems (ETS) rose by 9% to €19.9 million,
reflecting the continued strength of this business line. License
revenues for XML Business Integration, including third party sales,
increased by 52% (net of currency) to €6.9 million as a result of new
product launches and intensified marketing. This was the second quarter
of double-digit license growth for XML Business Integration, following
an increase of 20% (net of currency) in license revenues for the fourth
quarter of 2004. Revenue for maintenance was €43.7 million, a decline
of 1% from the year-ago period (unchanged on a constant currency
basis), while revenue for professional services increased by 4% to
€29.2 million.

Region North America/Northern Europe the most dynamic region

The North America/Northern Europe geographical segment including South
Africa saw the most dynamic growth during the first quarter, with
revenues of €44 million, an increase of 10% from the year-ago period.
The region confirmed its role as the company's most important
geographical market with 44% of total revenue in the first quarter in
comparison with 42% in the year-ago period. Southern and Western Europe
(with Latin America) had revenues of €30.3 million (up 2%) while
Central and Eastern Europe with Asia recorded revenues of €26.4 million
(also up 2%).

Improved operating margin through cost control

The improvement in operating margin to 18% (up 2 percentage points from
16% in the year-ago period) reflected the company's continued success
in maintaining cost discipline while investing in the expansion of the
business. While ensuring cost discipline, the company also pursued its
growth strategy by introducing new products, primarily in the XML
Business Integration line of business, entering new geographical
markets, and reinforcing its technological offering through targeted
acquisitions or partnerships. The total number of employees remained
substantially unchanged at 2,515 (in comparison with 2,512 a year ago),
although the percentage of employees outside Germany rose from 64% a
year ago to 70% in the first quarter of 2005, reflecting the company's
focus on expanding its business geographically while managing its cost

Net income and earnings per share also increase by 19%

Net income rose to €11.7 million, an increase of 19% over the year-ago
period. This represented a return on sales (ROS) of 12% in comparison
with 10% a year ago. Earnings per share were €0.43, also up 19% over
the first quarter of 2004, as there was no change in the average number
of shares outstanding.

"The results for the first quarter confirm that the value of our
business strategy, including a renewed focus on the customer, is being
recognized in the market," said CEO Karl-Heinz Streibich. "We are well
on our way to achieving our objectives for the current year. In
addition, the improvements in our operating performance are flowing
through to our shareholders, who are seeing a significant improvement
in earnings per share."

Strong balance sheet, sustained positive cash flow

Total shareholders' equity on March 31, 2005 was €336.9 million, an
increase of 17% from the year-ago period. The equity to assets ratio
rose to 62% from 55% a year ago. Cash and cash equivalents were €134.7
million, up 62% from €83.1 million. The improvement in the balance
sheet ratios reflected the company's sustained strong operating cash
flow which, for the first quarter of 2005, amounted to €21.8 million,
more than double the €10.7 million for the year-ago period. The
strength of the balance sheet is a critical factor in giving the
company the flexibility to pursue its long-term business strategy.


The company does not intend to modify its outlook for 2005 at this
time. Accordingly, Software AG continues to expect revenue growth for
the year as a whole 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 as a whole between 20 and 22 percent. "We are
pleased that we have succeeded in achieving our initial objectives for
2005," said Karl-Heinz Streibich. "Going forward, we intend to build on
these initial successes to achieve the momentum that will carry us to
our longer-term goals."

View detailed Q1 results here.

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, Tamino and
ApplinX. 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.

For further information and/or interview requests:

Software AG Belgium & Luxembourg

Sophie Verbeke

Marketing Communications Manager

Plejadenlaan 11 - Avenue des Pléiades 11

1030 Brussel/Bruxelles

Tel: +32 2 777 03 35

Fax: +32 2 771 99 63

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Creative Strategies

Elke De Ridder

Account Executive

Woluwedal 30

1932 Sint-Stevens-Woluwe

Tel: +32 2 267 41 60

Fax: +32 2 267 12 89

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