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Software weakens: stocks are in: Software AG earns far more than expected – expensive re-alignment | message



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

Based on provisional data, sales fell by 2 percent to EUR 865.7 million. The company had a negative currency effect estimated at EUR 26.7 million. Adjusted for currency effects, revenue grew by 2 percent. Before interest and tax (EBIT), Software AG earned 4 percent more at EUR 231.6 million. The margin grew to 26.9 percent from 25.3 percent. Profit after tax has increased by 17 percent to EUR 165.2 million.

Sales and EBIT were in line with market expectations. In the aftermath, analysts were expecting a slight increase of 63m euros in consensus.

The new boss orders Software AG for expensive growth paths

"In the fiftieth year of our existence, we will embark on a new, courageous journey," said the actor from August, the new executive director Sanjay Brahmawar on Thursday in Darmstadt. He wants to better connect the fast-paced, but still the youngest branch of machine software with the greatest division of integration software, and also relies more on partnerships.

By restructuring the structure and redirecting the focus on rental software, the manager wants to return the group to the growth path. In the medium term, growth is expected to grow by an average of more than 10 percent a year in digital business by 2023, with revenue expected to increase to 85 to 90 percent of sales.

"We have extremely strong products, financial strength and huge talent at work," Brahmawar told the dpa-AFX news agency. "But we invested too little in our brand and customer access, and we need to simplify our product offerings and focus more on the ecosystem of partnerships."

In the case of integration software for computer networking, the Group expects a growth rate of between 3 and 7 percent if it excludes business with cloud computing and cloud computing. It is expected that this will still be a small area to grow from 75 to 125 percent, but much faster than experts expected. In traditional business with databases, Software AG expects a drop of 5 percent

50 million euros for conversion plus download

First of all, the course will also cost you money. "In our strategic redirection, we will make additional investments, as well as direct R & D spending in future areas," said the director. In the current year, the company invests around 50m euros in the conversion, half of which is additional investment.

As a result, Financial Director Arnd Zinnhardt expects the operating profit margin (adjusted for Ebit) to fall by 28 to 30 percent in 2019 to 31.5 percent in the previous year. Analysts hoped far more. As of 2020, the subscription license model will switch to a subscriber system – revenue will gradually move as a rental rather than as a single premium. This should again cost up to 2 percentage points on the margin.

"Even though the numbers sold and earnings from 2020 will continue to be negatively affected by our move to leasing software, we see a significantly better trend in business this year," said Brahmawar. By 2021 this should be reflected on Erlsen and on the margins.
The growth program could be supplemented by downloading. "For a boost, we could certainly spend between 1 billion and 1.5 billion euros on data analytics or IoT business, but our strategic reorientation is geared to organic growth," said Brahmawar.

The investor is not satisfied

The bad side of the new growth trend cost Software AG shares on Thursday for the overall price increase in the previous year. Darmstädter's paper fell by 9.5 percent to 30.46 euros, before the minus fell to 5.53 percent at 31.80 euros recently.

The emphasis is on the weaker signals of profitability, analyst Gautam Pillai from Goldman Sachs said, as the company resets the course, which will initially cost money. Pillai expects that market expectations are limited to a one-time percentage.

His colleague Stacy Pollard of JPMorgan also talked about a very mixed perspective: The 2017 EBIT margin (28 to 30 percent) was well below market expectations, which was 31.6 percent above the level of the previous year they have.

The medium-term goal of increasing operating cash flow by 5 to 10 percent is better, JPMorgan's expert said. However, the exact moment for that is not clear.

FRANKFURT (Dow Jones)

DARMSTADT (dpa-AFX)

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Image source: Nigel Treblin / Getty Images, Software AG


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