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Software AG Annual Shareholders Meeting 2004 30th April 2004 Commerzbank, Frankfurt.

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Presentation on theme: "Software AG Annual Shareholders Meeting 2004 30th April 2004 Commerzbank, Frankfurt."— Presentation transcript:

1 Software AG Annual Shareholders Meeting th April 2004 Commerzbank, Frankfurt

2 Software AG Annual Shareholders Meeting 2004 Karl-Heinz Streibich CEO, Software AG

3 Review of 2003

4 4Annual Shareholders' Meeting Apr – 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

5 5Annual Shareholders' Meeting Apr-2004 Software AG 2003 Mainstay of Sales ADA/ NAT PS XML 56 % 29% 10%

6 6Annual Shareholders' Meeting Apr-2004 Software AG 2003 Product 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

7 7Annual Shareholders' Meeting Apr-2004 Plan for Profitable Growth Internationalization: Global networked company Focus: Expansion of two international business lines Restructuring: Rightsizing of the company

8 8Annual Shareholders' Meeting Apr-2004 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%

9 9Annual Shareholders' Meeting Apr-2004 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

10 10Annual Shareholders' Meeting Apr-2004 XML Business Integration Portfolio XML Business Integration Communicator XML Mediator XML Product Families XML Integration Solutions E-Government Self-Service Single Customer View Supply Chain Integration Information Integration (EII) XML Integration Packages Service Integration (ESB) Legacy Integration Business Process Management XML Integration Services Business Process Consulting Information Strategy Infrastructure Assessments Project Implementation 24x7 Support Education and Training Jonathan Airey

11 11Annual Shareholders' Meeting Apr-2004 Enterprise Transaction Systems (ETS) Portfolio Enterprise Transaction Systems (ETS) ETS Product Families ETS Advantage Services Natural Productivity Legacy Integration Web Enablement Application Management Services Performance & Tuning Migration Services Installation Services Technical Account Manager Mentoring DBA Services OPTIMIZE EXTEND MANAGE ETS Modernization Packages Joe Gentry

12 12Annual Shareholders' Meeting Apr-2004 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

13 13Annual Shareholders' Meeting Apr-2004 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

14 14Annual Shareholders' Meeting Apr-2004 Out Performance Stock Value ,59 20,

15 Arnd Zinnhardt CFO, Software AG Results Full Year 2003

16 16 Annual Shareholders' Meeting Apr-2004 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

17 Currency Impacts

18 18 Annual Shareholders' Meeting Apr-2004 Currency Impacts on Revenue FY 2003 Total Revenue Change Volume Actual 2003 Currency Effect Product Revenue Services Revenue Actual % % -6% -22% +3% -19% -7% -9% -3% (in mn. euros)

19 Revenue Full Year 2003

20 20 Annual Shareholders' Meeting Apr-2004 Revenue 2003 (in mn. euros) Full Year Δ % Δ% at constant currency Product Revenue License Maintenance % -8% -5% +3% 0% +5% Services % -19% Other % +70% TOTAL % -4%

21 21 Annual Shareholders' Meeting Apr-2004 Regional Revenue Distribution 2003 Services Revenue Southern / Western Europe 54% Central- / Eastern Europe 27% Americas 13% Northern Europe, Asia-SA 6% mn. euros mn. euros Product Revenue Americas 40% Northern Europe, Asia-SA 22% Central- / Eastern Europe 21% Southern / Western Europe 17%

22 22 Annual Shareholders' Meeting Apr-2004 ETS 26.4 Other 4.4 XML Integration Total: Total: 64.3 (in mn. euros) Research & Development by Product Group ETS 25.6 Other 4.3 XML Integration 34.4

23 Result Full Year 2003

24 24 Annual Shareholders' Meeting Apr-2004 Result 2003 (stated) (in mn. euros) Δ % Operating EBITDA % Goodwill Amortization % Depreciation % Financial Result % Operating Profit before Tax % Income from Investments Restructuring Expenses Profit before Tax Taxes Net Income

25 25 Annual Shareholders' Meeting Apr-2004 Operating Earnings 2003 (excl. Restrukturing Expenses and Income from Investments) * Operating profit before tax./. tax rate and amortization of goodwill 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) % % +31% % % % 4% 2%

26 Balance Sheet and Cash Flow

27 27 Annual Shareholders' Meeting Apr-2004 Balance Sheet Assets Dec. 31, 2002 Liabilities Dec. 31, 2002 Prepaid Expenses Total Dec. 31, 2003 Fixed Assets Inventories, Trade Receivables and other Assets Cash and Cash Equivalents Provisions Other Liabilities Total Dec. 31, Shareholders Equity 81.7 Deferred Income (in mn. euros) Deferred Taxes

28 28 Annual Shareholders' Meeting Apr-2004 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* % % % -26.1% -80.0% -14.9% +53.7% n/a -19.7%

29 Employees

30 30 Annual Shareholders' Meeting Apr-2004 Number of Employees by Region Δ% Total 2,577 2, % Central/Eastern Europe (thereof Germany) Southern/Western Europe- Americas Northern Europe, Asia/Pacific Other incl. HQ 382 (279) (367) % (-24%) -5% -7% -15% -16% FTEs

31 Arnd Zinnhardt CFO, Software AG Results 1st Quarter 2004 (IFRS)

32 32 Annual Shareholders' Meeting Apr-2004 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

33 33 Annual Shareholders' Meeting Apr-2004 Revenue Q (in mn. euro) Q Q Δ % Δ* % Product License Maintenance , % +6% -7% +3% +11% 0% Service % -15% Other Total % -2% * at constant currency

34 34 Annual Shareholders' Meeting Apr-2004 Operating Result Q (in mn. euros) Q Q Δ % Total Revenue % Cost of Sales % Gross Profit % R&D % Sales & Marketing % Administration % Other income/expense Operating Result (EBIT) * +89% * pre restructuring expenses

35 35 Annual Shareholders' Meeting Apr-2004 Net Result 2004 (in mn. euros) * pre restructuring expenses Q Q EBIT * Financial Income 0.7 Income from Investments 0.0 Restructuring Expenses Profit before Tax Taxes Net Income Earnigs per Share

36 Outlook 2004

37 37 Annual Shareholders' Meeting Apr-2004 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 years 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

38 Annual Shareholders Meeting 2004 Karl-Heinz Streibich CEO, Software AG

39 Outlook for 2004

40 40Annual Shareholders' Meeting Apr-2004 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 , etc.... ERP package Customers

41 41Annual Shareholders' Meeting Apr-2004 Market Requirements Modernization of existing IT systems Integration of existing applications and processes Migration of platforms Customers

42 42Annual Shareholders' Meeting Apr-2004 Customers Customer Orientation XML Technical Architects Marketing XMLi Customers ETS Technical Architects Marketing Enterprise Moderni- zation Research and Develop- ment Software AG system resellers (subsi- diaries)

43 43Annual Shareholders' Meeting Apr-2004 Portfolio Marketing Global Networked Company Development of Company Value Customers Sales TechnologyEmployees

44 44Annual Shareholders' Meeting Apr-2004 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:

45 45Annual Shareholders' Meeting Apr-2004 Sales Sale of enterprise integration solutions Consulting Implementation Products Operation Board CIO Engineers Area managers Sales Sale of technology products and technology solutions Time Access

46 46Annual Shareholders' Meeting Apr-2004 Sales - Implementation 1.Customer First culture 2.Target group: decision makers 3.Sales via consulting services 4.Partners with industry-specific expertise Sales

47 47Annual Shareholders' Meeting Apr-2004 Portfolio Marketing Portfolio Marketing Joe GentryJonathan Airey

48 48Annual Shareholders' Meeting Apr-2004 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

49 49Annual Shareholders' Meeting Apr-2004 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

50 50Annual Shareholders' Meeting Apr-2004 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

51 51Annual Shareholders' Meeting Apr-2004 Development of Company Value 80% XMLi: ETS Modernization: Expandable customer base with more than 3,000 customers worldwide Development of Company Value 20% 80%

52 52Annual Shareholders' Meeting Apr-2004 Preparation for the Future Cost adjustment Rightsizing Strategy Enterprise portfolio Growth Focus on strengths as a software product provider Content Brand Go-to-market model Organic/Sales Acquisitions Partnerships Goal: Market leader- ship Today:

53 53Annual Shareholders' Meeting Apr-2004


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