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Turnover is weaker: Stock breaks: Software AG earns significantly more than expected – expensive rearrangement message



However, the profitability of the https://www.finanzen.net/index/MDAX and TecDAX group was higher and earned more than expected in the bottom line. The software company also introduced its new corporate strategy for sustainable growth. Software AG expects further growth in the current year.

Based on preliminary data, sales fell by 2 percent to EUR 865.7 million. The company estimated the impact of the negative currency at EUR 26.7 million. Adjusting for currency effects, revenue grew by 2 percent. Prior to interest and tax (EBIT), Software AG earned 4 percent more than EUR 231.6 million. Thus, the difference increased to 26.9% from 25.3%. Profit after tax increased by 17 percent to EUR 165.2 million.

Sales and EBIT were in line with market expectations. Post-tax analysts had reached a consensus with less growth of € 63 million.

New boss orders for Software AG in the course of expensive growth

"In the fiftieth year of our existence, we will take a new, bold path," said the organizer since August, the new CEO of Sanjay Brahmawar on Thursday in Darmstadt. He wants to unite the fast growing, but still new, hardware software department with the largest integration software department and rely more on partnership.

By restructuring the structures and focusing on the rental software, the manager wants to return to the growth path. In the medium term, it is expected that the company will grow by more than 10 percent annually in digital business by 2023, and that the share of periodic revenue is expected to grow to 85-90 percent of sales.

"We have extremely strong products, financial strength and huge talent in the company," Brahmawars told the financial news agency dpa-AFX. "But we have invested too little in our brand and customer approaches, and we need to simplify our product offerings and focus on partnership ecosystems."

With regard to integration software for IT systems, the Group expects the currency-adjusted growth to be between 3 and 7 percent if business software and cloud are excluded. This small area is expected to grow by 75 to 125 percent, but much faster than expected. In the traditional database business, Software AG expects it to drop to 5 percent

EUR 50 million for conversion plus takeover

First, the course will also cost you money. "In our strategic reorientation, we will make additional investments as well as direct future R&D spending," said the manager. In the reporting year, the company invests approximately EUR 50 million, of which about half are additional investments.

As a result, CFO Arnd Zinnhardt expects operating margins (adjusted for Ebita) to fall by 28-30 percent in 2019 to 31.5 percent in the previous year. Analysts had hoped for much more. From 2020, the company's license fee model needs to be switched to a subscriber system, then revenue will gradually change as rent, not as a one-time premium. It would have to pay up to 2 percentage points of the reserve.

"Although our sales and profit ratios will be negatively affected by our move towards the year 2020, we are seeing a much better business trend this year," said Brahmawars, and in 2021 this should be reflected in Erlsen and again.
The growth program could be complemented by takeover. "In order to promote, we could definitely spend between 1 billion and 1.5 billion euros for data analysis or IoT business, but our strategic reorientation is focused on organic growth," said Brahmawar.

The investor is not satisfied

The new growth rate slowdown on Software AG on Thursday has cost a full year-on-year rise. Darmstaffter's papers have fallen by 9.5 percent to € 30.46 before the minus disappeared to 5.53 percent at € 31.80 recently.

The focus is on weaker yield signals, said Goldman Sachs analyst Gaut Pill, as the company is once again setting a course that will initially cost money. Pillai expects the expected future profit margins in the market to be limited to one digit.

His colleague Stacy Pollard from JPMorgan also talked about very nice prospects: the operating margin (adjusted for Ebita) for 2019, 28-30%, was well below market expectations, which was 31.6% above the previous year's level.

According to JPMorgan expert, the medium-term goal is to increase cash flow from 5 to 10 percent. However, the exact timing is not clear.

FRANKFURT (Dow Jones)

DARMSTADT (dpa-AFX)

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Image Sources: Nigel Treblin / Getty Images, Software AG


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