Software AG Annual Shareholders’ Meeting 2004
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Transcript of Software AG Annual Shareholders’ Meeting 2004
Software AG Annual Shareholders’ Meeting 2004
30th April 2004Commerzbank, Frankfurt
Software AG Annual Shareholders’ Meeting 2004
Karl-Heinz StreibichCEO, Software AG
Review of 2003
Annual Shareholders' Meeting 2004 30 -Apr-20044
2003 – Year of Restructuring
A difficult year for the IT industry Stagnant IT investment by companies Lengthy decision-making processes
But: By end of the year, first signs of an economic recovery
Software AG has exceeded financial forecasts: Sales by €7 million Operating result by €5 million
Annual Shareholders' Meeting 2004 30 -Apr-20045
Software AG 2003Mainstay of Sales
ADA/NAT
PS
XML
56 %
29%
10%
Annual Shareholders' Meeting 2004 30 -Apr-20046
Software AG 2003Product Situation
Adabas / Natural:
Mainframe relatively stable at high level
Tamino / EntireX:
Global potential for growth exists
Key competence XML integration
Further extend market leadership in Europe
Annual Shareholders' Meeting 2004 30 -Apr-20047
Plan for Profitable Growth
Internationalization: Global networked company
Focus:Expansion of two international business lines
Restructuring:Rightsizing of the company
Annual Shareholders' Meeting 2004 30 -Apr-20048
Global Network
Americas: 22 countries
Southern and Western Europe:
10 countries
Central and Eastern Europe:
9 countries
Northern Europe, Asia/Pacific, South Africa and Japan:18 countries
32%
28%
23%17%
Annual Shareholders' Meeting 2004 30 -Apr-20049
India: 43 R&D Employees
USA: 70 R&D Employees
UK: 15 R&D Employees
Spain: 8 R&D Employees
Germany: 243 R&D Employees
Global R&D Network
Technology
Annual Shareholders' Meeting 2004 30 -Apr-200410
XML Business Integration Portfolio
XML Business IntegrationXML Business Integration
Communicator XML Mediator
XML Product Families
XML Integration Solutions
E-GovernmentSelf-ServiceE-GovernmentSelf-Service
SingleCustomer View
SingleCustomer View
Supply ChainIntegration
Supply ChainIntegration
InformationIntegration(EII)
XML IntegrationPackages Service
Integration(ESB)
Legacy Integration
BusinessProcessManagement
XML Integration Services
Business ProcessConsulting
InformationStrategy
InfrastructureAssessments
ProjectImplementation
24x7 Support Educationand Training
Jonathan Airey
Annual Shareholders' Meeting 2004 30 -Apr-200411
Enterprise Transaction Systems (ETS) Portfolio
Enterprise Transaction Systems (ETS)Enterprise Transaction Systems (ETS)
ETS Product Families
ETS Advantage Services
Natural Productivity
LegacyIntegration
Web Enablement
ApplicationManagement
Services
Performance &Tuning
Migration Services
Installation Services
Technical Account Manager
MentoringDBA Services
OPTIMIZE EXTEND EXTEND MANAGE
ETS Modernization Packages
Joe Gentry
Annual Shareholders' Meeting 2004 30 -Apr-200412
Important Customer Projects
Americas New York City Department of Buildings Providence Washington Insurance State of Alaska
Southern and Western Europe Vodafone Amsterdam Airport Schiphol Universidad de León
Annual Shareholders' Meeting 2004 30 -Apr-200413
Important Customer Projects
Central and Eastern Europe Apollo Optik Sony Music Entertainment DLR (Deutsches Zentrum für
Luft- und Raumfahrttechnik)
Northern Europe, Asia/Pacific, South Africa and Japan
Welland Partnership Shepway District Council Nissan Australia
Annual Shareholders' Meeting 2004 30 -Apr-200414
Out Performance Stock Value 2003
€9,59
€20,19
02.01.03 16.02.03 02.04.03 17.05.03 01.07.03 15.08.03 29.09.03 13.11.03 28.12.03
Arnd ZinnhardtCFO, Software AG
Results Full Year 2003
Annual Shareholders' Meeting 2004 30 -Apr-200416
Agenda
2003 Currency Impacts Revenue Results Balance Sheet and Cash Flow Employees
2004 International Financial Rules and Standards Revenue and Results 1st Quarter Financial Forecast
Currency Impacts
Annual Shareholders' Meeting 2004 30 -Apr-200418
Currency Impacts on RevenueFY 2003
TotalRevenue
ChangeVolume
Actual 2003
CurrencyEffect
ProductRevenue
ServicesRevenue
Actual 2002
475.0
-4%
313.9
159.6
295.5
124.3
-11%
-6%
-22%
+3%
-19%
-7%
-9%
-3%
-21 -32
+10
-28
-31 -4
422.2
(in mn. euros)
Revenue Full Year 2003
Annual Shareholders' Meeting 2004 30 -Apr-200420
Revenue 2003(in mn. euros)
Full Year
2003
2002 Δ
% Δ%
at constantcurrency
Product Revenue License
Maintenance
295.5 104.3 191.2
313.9 113.0 200.9
-6%
-8% -5%
+3% 0%
+5%
Services
124.3 159.6 -22% -19%
Other
2.4 1.5 +52% +70%
TOTAL 422.2 475.0 -11% -4%
Annual Shareholders' Meeting 2004 30 -Apr-200421
Regional Revenue Distribution 2003
Services Revenue
Southern / Western Europe 54%
Central- / Eastern Europe 27%
Americas 13%
Northern Europe, Asia-SA 6%
124.3mn. euros
295.5mn. euros
Product Revenue
Americas 40%
Northern Europe, Asia-SA 22%
Central- / Eastern Europe 21%
Southern / Western Europe 17%
Annual Shareholders' Meeting 2004 30 -Apr-200422
ETS 26.4
Other 4.4
XML Integration 27.5
2003 Total: 58.3
2002Total: 64.3
(in mn. euros)
Research & Developmentby Product Group
ETS 25.6
Other 4.3
XML Integration 34.4
Result Full Year 2003
Annual Shareholders' Meeting 2004 30 -Apr-200424
Result 2003 (stated) (in mn. euros)
Δ 2003 2002 % Operating EBITDA 67.4 63.7 +6%
Goodwill Amortization -22.0 -21.9 +0%
Depreciation -7.4 -13.4 +45%
Financial Result +3.5 +3.2 +9%
Operating Profit before Tax 41.5 31.6 +31%
Income from Investments - +36.7
Restructuring Expenses -40.8 -17.6
Profit before Tax 0.7 50.7
Taxes -4.0 -17.2
Net Income -3.4 33.5
Annual Shareholders' Meeting 2004 30 -Apr-200425
Operating Earnings 2003(excl. Restrukturing Expenses and Income from Investments)
* Operating profit before tax ./. tax rate and amortization of goodwill
2003 2002 Δ %
Operating Profit before Tax Margin (% of Revenue)
Pro Forma Profit after Tax*
Pro Forma Earnings per Share
Pro Forma Earnings per Share (pre Amortization of Goodwill)
(in mn. euros)
Margin (% of Revenue)
41.5 10%
31.6 7%
+31%
17.4
11.3
+54%
0.64
0.41
+54%
1.44 1.22 +19%
4% 2%
Balance Sheet and Cash Flow
Annual Shareholders' Meeting 2004 30 -Apr-200427
Balance Sheet
AssetsDec. 31,
2002
Liabilities
Dec. 31,
2002
Prepaid Expenses
Total
Dec. 31, 2003
Fixed Assets
Inventories, Trade Receivables and other Assets
Cash and CashEquivalents
Provisions
Other Liabilities
Total
Dec. 31, 2003
214.5Shareholders’
Equity
81.7Deferred Income
440.8
108.7
35.9
(in mn. euros)
228.4
57.7
445.4
117.6
41.7
199.9
445.4
7.0
33.8
130.5
74.2
Deferred Taxes
440.8
221.1
6.9 0.2
137.2
7.4
Annual Shareholders' Meeting 2004 30 -Apr-200428
Cash Flow Analysis FY 2003
(in Mio. Euro)
FY 2003 FY 2002 Δ %
Operating Cash Flow
./. CapEx
Free Cash Flow
+ Reversal of Factoring
+ Cash-out for Restructuring
+ Tax Payment for Previous Periods
Organic Cash Flow % of Revenue
* 27.3 mn. shares
Organic Cash Flow per Share*
40.7-13.8
26.9
28.9
12.1
0.0
67.914.3%
2.49
15.5-10.2
5.3
24.6
18.6
6.0
54.512.9%
2.00
-61.9%-26.1%
-80.0%
-14.9%
+53.7%
n/a
-19.7%
-19.7%
Employees
Annual Shareholders' Meeting 2004 30 -Apr-200430
Number of Employees by Region
2003
2002
Δ %
Total
2,577
2,920
- 12%
Central/Eastern Europe (thereof Germany)
Southern/Western Europe- Americas Northern Europe, Asia/Pacific Other incl. HQ
382 (279)
816
493
174
712
475 (367)
861
532
204
848
- 20% (- 24%) - 5% - 7% -1 5% - 16%
FTEs
Arnd ZinnhardtCFO, Software AG
Results 1st Quarter 2004 (IFRS)
Annual Shareholders' Meeting 2004 30 -Apr-200432
International Financial Rules and Standards (IFRS)
In general, no major variations in result-relevant figures
Key differences between IFRS and HGB (German GAP): Profit and loss statement
No amortization of goodwill Services revenue Structuring of costs (cost of sales method)
Balance sheet Fixed assets Shareholders’ equity
Annual Shareholders' Meeting 2004 30 -Apr-200433
Revenue Q1 2004(in mn. euro)
Q1 2004
Q1 2003
Δ %
Δ* %
Product License Maintenance
67.4 23.3 44,1
69.2 21.9 47.3
-3 % +6 % -7 %
+3 % +11 %
0 %
Service
28.0
33.6
-17 %
-15 %
Other
0.3
0.3
Total
95.7
103.1
-7 %
-2 %
* at constant currency
Annual Shareholders' Meeting 2004 30 -Apr-200434
Operating Result Q1 2004 (in mn. euros)
Q1 2004
Q1 2003
Δ %
Total Revenue
95.7 103.1 - 7%
Cost of Sales
-33.3 -39.4 - 15%
Gross Profit
62.4 63.7 - 2%
R&D
-15.0 -16.2 - 7%
Sales & Marketing
-20.6 -26.0 - 21%
Administration
-11.1 -15.1 - 26%
Other income/expense
-0.6 +1.6
Operating Result (EBIT)
15.1 8.0* +89%
* pre restructuring expenses
Annual Shareholders' Meeting 2004 30 -Apr-200435
Net Result 2004(in mn. euros)
* pre restructuring expenses
Q1
2004
Q1
2003
EBIT
15.1 8.0*
Financial Income
0.7 0.7
Income from Investments
0.0 0.0
Restructuring Expenses 0.0 - 31.8
Profit before Tax
15.8 - 23.1
Taxes
- 6.0 8.3
Net Income 9.8 - 14.8
Earnigs per Share 0.36 - 0.54
Outlook 2004
Annual Shareholders' Meeting 2004 30 -Apr-200437
Financial Forecast 2004
Focus 2004 is on stabilizing revenue (net of currency effects) License sales will increase in core business lines and make up for
reduction of non-strategic business Maintenance will show continued stability
2004 will show profit growth Operating result will increase by approx. 25% from previous year’s
59.1 million € Operating margin will increase Strong organic cash flow will continue EPS (including SAP SI sale Q2) expected in the range of 2.50 – 2.60
Euro
Annual Shareholders’ Meeting 2004
Karl-Heinz StreibichCEO, Software AG
Outlook for 2004
Annual Shareholders' Meeting 2004 30 -Apr-200440
Customer Requirements
Enterprise system
modernization
Mission-critical applications
Business-process integration
▪Optimize, Extend, Manage
Real-time information
Single view of information
Self-service
Simplification of value-added chain
Automation of compliance
etc.
CRM package
DMS package
E-mail,etc.
...ERP package
Customers
Annual Shareholders' Meeting 2004 30 -Apr-200441
Market Requirements
Modernization of existing IT systems
Integration of existing applications and processes
Migration of platforms
Customers
Annual Shareholders' Meeting 2004 30 -Apr-200442
Customers
Customer Orientation
XML TechnicalArchitects
MarketingXMLi
Customers
ETS TechnicalArchitects
Marketing EnterpriseModerni-zation
Researchand Develop-ment
Software AG system resellers (subsi-diaries)
Annual Shareholders' Meeting 2004 30 -Apr-200443
PortfolioMarketing
Global Networked Company
Development of Company
Value
Customers
Sales
TechnologyEmployees
Annual Shareholders' Meeting 2004 30 -Apr-200444
Global Knowledge Management System
As an internal business management system:
•Customer projects•Customer profiles•Projects and solutions•Customer-visit reports•Market studies•Competitor studies•Press information
Customers
Global access to information about:
Annual Shareholders' Meeting 2004 30 -Apr-200445
Sales
Sale of enterprise integration solutions
Consulting Implementation Products Operation
Board
CIO
Engineers
Areamanagers
Sales
Sale of technology products and technology solutions
Time
Access
Annual Shareholders' Meeting 2004 30 -Apr-200446
Sales - Implementation
1. “Customer First” culture
2. Target group: decision makers
3. Sales via consulting services
4. Partners with industry-specific expertise
Sales
Annual Shareholders' Meeting 2004 30 -Apr-200447
PortfolioMarketing
Portfolio Marketing
Joe Gentry Jonathan Airey
Annual Shareholders' Meeting 2004 30 -Apr-200448
India: 43 R&D Employees
USA: 70 R&D Employees
UK: 15 R&D Employees
Spain: 8 R&D Employees
Germany: 243 R&D Employees
Global R&D Network
Technology
Annual Shareholders' Meeting 2004 30 -Apr-200449
Technology - Aims
1. Focusing of R&D resources on 2 business lines
2. Global R&D network
3. Concentration on products with the potential for market leadership
4. Link between R&D and customer requirements through the use of technology architects
Aim: Expansion of market leadership as vendor for software products in the database and integration middleware sector
Technology
Annual Shareholders' Meeting 2004 30 -Apr-200450
Employees
Employees
1. Culture of “Customer First"
2. Global, cross-departmental teamwork – best practice focus
3. Culture of innovation
4. Culture of high performance
Atmosphere of innovation, creativity and success
Annual Shareholders' Meeting 2004 30 -Apr-200451
Development of Company Value
80%
XMLi:
ETS Modernization:
Expandable customer base with more than 3,000 customers worldwide
Development of Company
Value
20%
80%
Annual Shareholders' Meeting 2004 30 -Apr-200452
Preparation for the Future
Cost adjustment
RightsizingRightsizing
StrategyStrategy
Enterprise portfolio
Enterprise portfolio
GrowthGrowth
Focus on strengths as a software product provider
Content Brand Go-to-market
model
Organic/Sales Acquisitions Partnerships
Goal:Market leader-
ship
Today:
Annual Shareholders' Meeting 2004 30 -Apr-200453