Software AG's shares down more than 7 percent on margin outlook - Metro US

Software AG’s shares down more than 7 percent on margin outlook

Karl-Heinz Streibich, CEO of German business software company Software AG is seen during an interview with Reuters in Tel Aviv April 5, 2011. REUTERS/Nir Elias

FRANKFURT (Reuters) – Software AG issued a cautious outlook on its profit margins on Thursday, triggering a 7 percent share-price slide even though the German software group also said its industrial internet business could double in size in 2018.

Analysts at Baader Helvea said the company’s 2018 core margin guidance of 30-32 percent was on the low side of consensus. Management, on a conference call, said it had taken a conservative view on the impact of a new accounting rule on revenue recognition.

IFRS15, as the rule is called, is likely to have the greatest effect on software companies and will be in focus when Germany’s leading business software house SAP reports annual results next week.

Chief Executive Karl-Heinz Streibich, who is retiring at the end of July, focused on the industrial internet where he said Software AG had become the “undisputed leader”.

Streibich, 65, confirmed that he would be stepping down when his five-year contract runs out and said a successor would be announced soon.

Darmstadt-based Software AG has from Jan. 1 split out its IoT/Cloud (Internet of Things) business into a separate division that it forecast would grow by between 70 and 100 percent in 2018, net of currency, from an outturn of 14.9 million euros last year.

That works out at 25-30 million euros, an increase from earlier guidance of 20 million. Software AG has signed a string of deals with IoT platforms run by the likes of Robert Bosch GmbH [ROBG.UL] and Siemens .

Germany’s No.2 business software maker said its adjusted earnings before interest, tax and amortization (EBITA) rose by 9 percent in the fourth quarter to 98.4 million euros ($122.4 million), in line with a Reuters poll of analysts.

Its EBITA margin expanded by 2.5 percentage points to 36.7 percent, a record, and came in at 31.8 percent for 2017 as a whole.

($1 = 0.8042 euros)

(Reporting by Douglas Busvine; Editing by Maria Sheahan and Jane Merriman)

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