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					Software AG
Annual Shareholders’ Meeting 2004


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


Karl-Heinz Streibich
CEO, Software AG
Review of 2003
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   4   30 -Apr-2004
Software AG 2003
Mainstay of Sales


                                        56 %


                                        ADA/
                                        NAT




                                               29%

                                               PS

                                                            10%

                                                             XML




Annual Shareholders' Meeting 2004   5               30 -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


Annual Shareholders' Meeting 2004   6   30 -Apr-2004
Plan for Profitable Growth



 Internationalization:
  Global networked company

 Focus:
  Expansion of two international business lines

 Restructuring:
  Rightsizing of the company




Annual Shareholders' Meeting 2004   7   30 -Apr-2004
 Global Network



 Americas: 22 countries                            Central and Eastern
                                                        Europe:
                                                        9 countries

                        32%

                                         28%

                                                     23%
                                                                      17%




                                                    Northern Europe, Asia/Pacific,
 Southern and Western                                  South Africa and Japan:
  Europe:                                               18 countries
  10 countries


 Annual Shareholders' Meeting 2004   8         30 -Apr-2004
Global R&D Network
                                                                               Technology




                                                    UK: 15 R&D
                                                    Employees
                            USA: 70                            Germany: 243
                            R&D Employees                      R&D Employees

                                            Spain: 8 R&D
                                            Employees

                                                                         India: 43 R&D
                                                                         Employees




Annual Shareholders' Meeting 2004   9           30 -Apr-2004
XML Business Integration Portfolio

                                                                              Jonathan Airey

   XML Business Integration

                XML Integration          E-Government            Single                       Supply Chain
                    Solutions            Self-Service            Customer View                Integration




                XML Integration
                    Packages              Information        Service                                 Business
                                                                                   Legacy
                                          Integration        Integration                             Process
                                                                                   Integration
                                          (EII)              (ESB)                                   Management




                XML Product
                    Families
                                            Communicator                   XML Mediator



                XML Integration                         Business Process       Information           Project
                    Services                            Consulting             Strategy              Implementation

                                                        24x7 Support           Education             Infrastructure
                                                                               and Training          Assessments


Annual Shareholders' Meeting 2004   10                     30 -Apr-2004
Enterprise Transaction Systems
(ETS) Portfolio

                                                                                Joe Gentry


      Enterprise Transaction Systems (ETS)


                                           Natural             Legacy                       Application
                   ETS Modernization                                             Web
                                         Productivity        Integration                   Management
                                                                              Enablement
                       Packages                                                              Services

                                         OPTIMIZE              EXTEND           EXTEND       MANAGE




                   ETS Product
                       Families




                                                       Technical           Performance &    Installation
                   ETS Advantage                    Account Manager            Tuning        Services
                       Services
                                                        DBA Services          Mentoring      Migration
                                                                                             Services




Annual Shareholders' Meeting 2004   11                  30 -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




Annual Shareholders' Meeting 2004    12              30 -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



Annual Shareholders' Meeting 2004     13              30 -Apr-2004
Out Performance
Stock Value 2003
   270,0%



                                     Software AG
   230,0%                            NASDAQ 100
                                                                                           €20,19
                                     TecDax

   190,0%




   150,0%




   110,0%
  €9,59


     70,0%
       02.01.03
        01.02.03      16.02.03
                       02.16.03     02.04.03
                                     04.02.03   17.05.03
                                                 05.17.03   01.07.03
                                                             07.01.03    15.08.03
                                                                         08.15.03   29.09.03
                                                                                    09.29.03   13.11.03
                                                                                               11.13.03   28.12.03
                                                                                                          12.28.03   02.11.04

Annual Shareholders' Meeting 2004   14                          30 -Apr-2004
Results
Full Year 2003


Arnd Zinnhardt
CFO, Software AG
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



Annual Shareholders' Meeting 2004   16   30 -Apr-2004
Currency Impacts
Currency Impacts on Revenue
FY 2003
                                                                            (in mn. euros)


                                    Actual    Change           Currency   Actual
                                     2002     Volume            Effect     2003

                                               -21              -32
 Total
                                    475.0                                 422.2     -11%
 Revenue
                                               -4%              -7%

                                              +10
                                                                -28
 Product
 Revenue                            313.9                                 295.5     -6%
                                              +3%               -9%




 Services                                     -31                -4
                                    159.6                                 124.3     -22%
 Revenue                                      -19%               -3%

Annual Shareholders' Meeting 2004        18     30 -Apr-2004
Revenue Full Year 2003
Revenue 2003
                                                                           (in mn. euros)




                                                                     Δ      Δ%
          Full Year                      2003              2002     % at constant
                                                                          currency
      Product Revenue                    295.5             313.9    -6%     +3%
             License                     104.3             113.0    -8%       0%
             Maintenance                 191.2             200.9    -5%     +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   20      30 -Apr-2004
Regional Revenue Distribution 2003



Services Revenue                                                  Product Revenue
 Southern / Western                                               Americas 40%
  Europe 54%
                                                                   Northern Europe,
 Central- / Eastern                                                Asia-SA 22%
  Europe 27%                         124.3
                                    mn. euros                      Central- / Eastern
 Americas 13%                                         295.5        Europe 21%
                                                      mn. euros
 Northern Europe,                                                 Southern /
  Asia-SA 6%                                                        Western
                                                                    Europe 17%




Annual Shareholders' Meeting 2004    21         30 -Apr-2004
Research & Development
by Product Group
                                                                (in mn. euros)


   2003
   Total: 58.3
                                                           Other 4.4

                     XML Integration 27.5
                                                           ETS 26.4




    2002
    Total: 64.3
                                                           Other 4.3

                     XML Integration 34.4
                                                           ETS 25.6



Annual Shareholders' Meeting 2004   22      30 -Apr-2004
Result Full Year 2003
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   24   30 -Apr-2004
Operating Earnings 2003
(excl. Restrukturing Expenses and Income from Investments)
                                                                              (in mn. euros)




                                                    2003               2002      Δ%

   Operating Profit before Tax                     41.5               31.6    +31%
    Margin (% of Revenue)                          10%                 7%

   Pro Forma Profit after Tax*                     17.4               11.3    +54%
     Margin (% of Revenue)                          4%                 2%

   Pro Forma Earnings per Share                     0.64              0.41    +54%
   Pro Forma Earnings per Share                     1.44              1.22    +19%
   (pre Amortization of Goodwill)




   * Operating profit before tax ./. tax rate and amortization of goodwill

 Annual Shareholders' Meeting 2004   25          30 -Apr-2004
Balance Sheet and Cash Flow
Balance Sheet
                                                                                              (in mn. euros)



                            Assets                                            Liabilities
      Dec. 31,                             Dec. 31,            Dec. 31,                         Dec. 31,
      2003                                  2002                2003                             2002

                                                                     41.7        Other             35.9
                        Cash and Cash           7.4                            Liabilities
         74.2            Equivalents
                                                                117.6          Provisions        108.7
                         Inventories,
                       Trade Receivables    137.2
       130.5            and other Assets
                                                                     57.7   Deferred Income        81.7
        33.8             Deferred Taxes         0.2
                        Prepaid Expenses        6.9
         7.0
                                                                             Shareholders’
       199.9               Fixed Assets     221.1               228.4           Equity           214.5




       445.4                   Total        440.8               445.4           Total            440.8



Annual Shareholders' Meeting 2004          27         30 -Apr-2004
Cash Flow Analysis
FY 2003
                                                                         (in Mio. Euro)




                                                FY 2003        FY 2002    Δ %


    Operating Cash Flow                            15.5          40.7    -61.9%
         ./. CapEx                                -10.2         -13.8     -26.1%
    Free Cash Flow                                   5.3        26.9     -80.0%
     + Reversal of Factoring                        24.6        28.9     -14.9%
     + Cash-out for Restructuring                   18.6         12.1    +53.7%

     + Tax Payment for Previous Periods                  6.0      0.0       n/a
    Organic Cash Flow                            54.5            67.9    -19.7%
         % of Revenue                           12.9%          14.3%
    Organic Cash Flow                              2.00         2.49     -19.7%
    per Share*



  * 27.3 mn. shares
Annual Shareholders' Meeting 2004   28    30 -Apr-2004
Employees
Number of Employees by Region


              FTEs                       2003           2002     Δ%

                 Total                   2,577          2,920    -12%

               Central/Eastern Europe      382            475    -20%
                (thereof Germany)        (279)          (367)   (- 24%)

                 -
              Southern/Western Europe       816          861     -5%

              Americas                      493          532     -7%

              Northern Europe,              174          204     -15%
              Asia/Pacific

              Other incl. HQ                712          848     -16%




Annual Shareholders' Meeting 2004   30   30 -Apr-2004
Results 1st Quarter 2004 (IFRS)


Arnd Zinnhardt
CFO, Software AG
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   32   30 -Apr-2004
Revenue Q1 2004
                                                                         (in mn. euro)




                                          Q1               Q1      Δ         Δ*
                                         2004             2003     %         %

      Product                            67.4              69.2   -3%       +3%
         License                         23.3              21.9   +6%      +11%
         Maintenance                     44,1              47.3   -7%        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   33     30 -Apr-2004
Operating Result Q1 2004
                                                                       (in mn. euros)




                                          Q1             Q1      Δ
                                         2004           2003     %

          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   34   30 -Apr-2004
Net Result 2004
                                                                  (in mn. euros)




                                                Q1          Q1
                                               2004        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




    * pre restructuring expenses
Annual Shareholders' Meeting 2004   35   30 -Apr-2004
Outlook 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 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   37   30 -Apr-2004
Annual Shareholders’ Meeting 2004


Karl-Heinz Streibich
CEO, Software AG
Outlook for 2004
Customer Requirements
                                                                                 Customers

      Enterprise                          Business-process integration
       system
                                            Real-time information
     modernization
                                            Single view of information
Mission-critical                            Self-service
applications
                                            Simplification of value-added chain
                                            Automation of compliance
                                            etc.




                                         ERP            CRM       DMS       E-mail, ...
                                         package        package   package   etc.

▪ Optimize, Extend,
  Manage
Annual Shareholders' Meeting 2004   40             30 -Apr-2004
Market Requirements
                                                        Customers




          Modernization of existing
          IT systems

          Integration of existing applications
          and processes

          Migration of platforms




Annual Shareholders' Meeting 2004   41   30 -Apr-2004
Customer Orientation
                                                                              Customers




                                          Marketing
  Research                   ETS          Enterprise
                                                           Software
  and                        Technical    Moderni-         AG system
  Develop-                   Architects   zation           resellers   Customers
  ment                                                     (subsi-
                                                           diaries)

                             XML          Marketing
                             Technical    XMLi
                             Architects




Annual Shareholders' Meeting 2004   42                 30 -Apr-2004
Global Networked Company


                                            Customers




        Employees                                                       Technology
                                           Development
                                           of Company
                                              Value




                               Portfolio                        Sales
                               Marketing



Annual Shareholders' Meeting 2004   43           30 -Apr-2004
Global Knowledge Management
System
                                                                      Customers


As an internal business management
system:

                                                 Global access
                                             to information about:


                                         •   Customer projects
                                         •   Customer profiles
                                         •   Projects and solutions
                                         •   Customer-visit reports
                                         •   Market studies
                                         •   Competitor studies
                                         •   Press information




Annual Shareholders' Meeting 2004   44                30 -Apr-2004
Sales
                                                                                   Sales

                                    Access


         Board
                                             Sale of enterprise integration solutions

      Area
      managers


           CIO                               Sale of technology products and
                                             technology solutions
    Engineers

                                                                                        Time

                                      Consulting    Implementation    Products   Operation




Annual Shareholders' Meeting 2004    45                30 -Apr-2004
Sales - Implementation
                                                        Sales




 1. “Customer First” culture

 2. Target group: decision makers

 3. Sales via consulting services

 4. Partners with industry-specific expertise




Annual Shareholders' Meeting 2004   46   30 -Apr-2004
Portfolio Marketing
                                                                     Portfolio
                                                                     Marketing

                Joe Gentry                              Jonathan Airey




Annual Shareholders' Meeting 2004   47   30 -Apr-2004
Global R&D Network
                                                                               Technology




                                                    UK: 15 R&D
                                                    Employees
                            USA: 70                            Germany: 243
                            R&D Employees                      R&D Employees

                                            Spain: 8 R&D
                                            Employees

                                                                         India: 43 R&D
                                                                         Employees




Annual Shareholders' Meeting 2004   48          30 -Apr-2004
Technology - Aims
                                                        Technology



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

Annual Shareholders' Meeting 2004   49   30 -Apr-2004
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   50   30 -Apr-2004
Development of Company Value
                                                                      Development
                                                                      of Company
                                                                          Value
Expandable customer base with more
than 3,000 customers worldwide
                                                              XMLi:




                                                   20%




                                         80%
                     80%


ETS Modernization:




Annual Shareholders' Meeting 2004   51         30 -Apr-2004
Preparation for the Future

                                                                                      Goal:
                                            Today:
                                                                                  Market leader-
                                                                                      ship




                                                                                 Growth

                                                                Enterprise
                                                                               Organic/Sales
                                                                 portfolio
                                                                               Acquisitions
                                                                               Partnerships
                                            Strategy          Content
                                                              Brand
                                                              Go-to-market
            Rightsizing                   Focus on            model
                                          strengths as a
                                          software product
        Cost adjustment                  provider


Annual Shareholders' Meeting 2004   52                 30 -Apr-2004
Annual Shareholders' Meeting 2004   53   30 -Apr-2004

				
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