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Software AG Middle East Posts 67 Percent Revenue Growth

Published Feb 10, 2010

Software AG has reported a significant increase in revenue and net income for fiscal year 2009, as Germany’s second largest software company beat market expectations. Group revenues amounted to €847.4 million, up 18 per cent in 2009 (2008: €720.6 million). EBIT increased by 21 per cent to €218.2 million for the same period, delivering an EBIT margin of 25.8 per cent. The company's strong global performance was likewise evident in the Middle East, where Software AG achieved a 67 per cent overall revenue growth in 2009 compared with 2008.

Marco Gerazounis, Senior Vice President, Software AG, Middle East, said: "Local operations in the Middle East remained strong in 2009 as year-on-year revenue growth reached 67 per cent compared with 2008. The Middle East has recently been a significant driver in overall growth as the region's performance was higher than that of the Software AG Group.”

Meanwhile, license revenues were at €269.9 million reflecting the difficult market conditions in 2009 (2008: €272.0 million). Maintenance was up by 16 per cent to €310.6 million (2008: €267.1 million). The acquisition of IDS Scheer drove Services & Consulting revenues up by 48 per cent to €262.5 million (€177.8 million). Net income rose by 22 per cent to €140.8 million from €115.9 million in 2008. Earnings per share rose 21 per cent to €4.92 (€4.05 in 2008). For 2010, Software AG forecasts revenue growth of 25 to 30 per cent at constant currency rates and net income up 8 to 12 per cent.

Record results in 2009:

Most importantly for a software company, total product revenue (license and maintenance) rose by 8 per cent to €580.5 million (€539.1 million in 2008). Services & Consulting revenue rose by 48 per cent to €262.5 million (€177.8 million in 2008).

Against a backdrop of continuing economic recession, the webMethods business line (integration software) product revenue was up 5 per cent to €219.9 million compared with 2008 (€208.0 million) and total revenue by 3 per cent to €324.9 million (€315.7 million in 2008). Through an improved sales mix and increased sales efficiency the webMethods business line increased its contribution to earnings by 15 per cent to €70.1 million (2008 €60.8 million). webMethods contributed more in 2009 than ever before to Group results.

Product revenue from the data management business ETS amounted to €327.7 million, marginally under the 2008 figure of €330.6 million. An 8 per cent increase in maintenance to €187.9 million (2008: €173.8 million) compensated for a decrease in license revenue to €139.8 million (2008: €156.8 million) attributable to difficult ETS trading conditions in Japan.

The consolidation of IDS Scheer, as of August 20, 2009, as a third Software AG business line had added revenue of €126.5 million.

“We reported record numbers again in 2009. The acquisition of IDS Scheer will help us build a leadership position for Business Process Excellence software,” said Software AG CEO, Karl-Heinz Streibich. “In the fourth quarter we closed an increased number of large deals. We are seeing the first signs of an economic recovery. Software AG is an excellent position to benefit from this development.”

Fourth Quarter:

The fourth quarter 2009 returned total revenue of €292.1 million, 38 percent up on €212.4 million in 2008. Product revenue was up 11 percent to €181.1 million (2008: 163.2 million) and Services & Consulting up 130 percent to €109.0 million (2008: €47.3 million). The significant rise in Services & Consulting revenue is due to the contribution of IDS Scheer whose results are being consolidated for a full quarter for the first time.

The fourth quarter also saw webMethods license revenue up by 21 per cent to €43.5 million (2008: €35.8 million); in comparison to the third quarter this represents doubling of new business. Total business line revenue was €98.9 million, 8 per cent up on €91.4 million in 2008. This growth in webMethods sales in combination with an increased number of large deals in the quarter indicated the first signs of an economic recovery.

ETS product revenue at €87.7 was up 6 per cent in the fourth quarter compared with the third quarter showing normal seasonal development. It was, however, under the comparable quarter in 2008 (€101.2 million). This was due to delayed business in Japan. In consequence, total business line revenue of €105.4 million was 13 per cent down on €121 million revenue in 2008.

Comparing fourth-quarter business development to the third quarter, the IDS Sheer business line showed revenue gains in all areas. Total operating revenue was up 14 per cent and contributed €87.9 million to Software AG Group revenues. Services & Consulting revenue was up 9 per cent and ARIS license revenue up 83 per cent to €11.5 million. This strong growth in license revenue mirrored the development in the webMethods business line and is another indicator of customer investment in new technologies.

Operating results and cash flow:

Software AG achieved a revenue increase of 18 percent with only a moderate increase in costs. This demonstrates a further increase in efficiency. This led to an increase of 21 per cent in EBIT to €218.2 million (2008 €180.5 million) and an EBIT margin of 25.8 per cent (2008: 25.1 per cent).

A reduced tax rate of 32.7 per cent of the consolidated company contributed to a growth in net income of 22 per cent to €140.8 million (2008: €115.9 million). Earnings per share rose to €4.92 (2008: €4.05).

Free cash flow performed extremely well rising 41 per cent to €188.4 million from €133.4 million in 2008. In the fourth quarter 2009 free cash flow was up 63 per cent to €68.6 million.

"We have benefited over the full year from cost-cutting measures which we began in 2008. We were able to return an EBIT above our target, increase our EPS by 21 per cent and our free cash flow by 41 per cent. In the course of integrating IDS Scheer, we will use the efficient processes of Software AG in order to sustainably increase the profit of the Group," said Arnd Zinnhardt, Chief Financial Officer of Software AG.

Forecast for 2010:

Software AG is forecasting for fiscal year 2010, at constant currency rates, total revenue growth of 25 to 30 per cent with product revenue growth of 12 to 15 per cent. The company also forecasts growth in net income of 8 to 12 per cent.

IDS Scheer Acquisition:

Software AG now holds 91 per cent of IDS Scheer shares. A domination agreement was approved at an extraordinary general meeting of IDS Scheer on January 8, 2010. Software AG therefore expects to realise cost synergies of €25 to €30 million. To accelerate the organisational integration a merger of the two companies is planned. The minority shareholders of IDS Scheer AG would then become shareholders of Software AG. The company plans to buy the required shares on the open market within the next few months.

For further information:

Orient Planet PR & Marketing Communications
Tel: +971 43988901
Fax: +971 43988941
P.O.Box 23345, Dubai, UAE
Email: media@orientplanet.com
Website: www.orientplanet.com



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