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However, the profitability of the group listed at https://www.finanzen.net/index/MDAX and TecDAX was higher and, in the end, earned more than expected. The software also presented its new corporate strategy for sustainable growth. Software AG expects further growth for the current year.
Based on the temporary figures, sales fell 2 percent to 865.7 million euros. The company estimates the negative effects of the currency at EUR 26.7 million. Adjusted for currency effects, earnings increased by 2 percent. Prior to Interest and Tax (EBIT), Software AG earned 4 percent more to 231.6 million euros. The margin, therefore, improved to 26.9 per cent from 25.3 per cent. Profit after tax increased by 17 percent to 165.2 million euros.
Sales and EBIT were in line with market expectations. In post-tax analysis, analysts expected a consensus with a slight increase of up to 63m euros.
New boss orders software A AG expensive growth course
"In the fiftieth year of our existence, we will take a new, courageous road," said the August actor, the new CEO Sanjay Brahmavar in Darmstadt on Thursday. He wants to combine the fast-growing, yet young, machine-software industry with the largest software integration partition, and also relies more on partnerships.
With restructuring structures and shifting focus on rental software, the manager wants to return the group to the growth path. In the medium term, the company is expected to grow by an average of more than 10 percent annually in digital business by 2023, with the percentage of recurring revenues expected to grow to 85 to 90 percent of sales.
"We have extremely strong products, financial power and huge talent in business," Brahmar told financial news agency dpa-AFX. "But we invest too little in our brand and client approach, and we need to focus our products and focus more on the ecosystem of partnerships."
In the case of integration software for network IT systems, the Group expects a growth adjusted to currencies between 3 and 7 per cent if the business of the software and the cloud are excluded. The still small surface is expected to grow to 75 to 125 percent, but much faster than experts expected. In the traditional database business, Software AG expects a decline of up to 5 percent
50 million for conversion plus download
First, the course will also cost money. "In our strategic diversion, we will make additional investments, as well as direct costs for research and development of future areas," said the manager. In the current year, the company invests about 50m euros in conversion, of which about half are additional investments.
As a result, CFO Arnd Zinnhardt expects margins for operating profit (adjusted Ebita) to fall by 28 to 30 percent in 2019 to 31.5 percent in the previous year. Analysts were hoping for much more. By 2020, the licensing fee for the company should be transferred to the subscriber system – revenues will flow gradually as rent, not as a single premium. It should again cost up to 2 percentage points on the margin.
"Although the number of sales and revenues from 2020 will continue to be a negative influence on our move to rental software, we are already seeing a significantly better business trend this year," said Bramar. As early as 2021, this should be reflected in Erlsen and the margins again.
The growth program can be upgraded by download. "For an incentive, we could certainly spend between 1 and 1 billion euros for data analysis or in the business of IOT, but our strategic reorientation is focused on organic growth," said Bramar.
The developer is not satisfied
At the start of trading on Thursday, investors were less enthusiastic: the stock market was affected by the weak annual number and the prospect of disappointment. As a result, Darmstadt's documents were breached up to 9.5 percent, thus giving full profits in the first weeks of the year. There is currently another minus of 6.77 percent to 31.38 euros on the track.
Additional costs for strategic reorganization have put pressure on the results, it was reported by Anlaysehaus Pareto. JPMorgan analyst Stacy Pollard also noted that investors should find it disappointing.
FRANKFURT (Dow Jones)
Image sources: Nigel Treblin / Getty Images, Software AG