DARMSTADT (dpa-AFX) - Software AG did well at the end of the year and still met its own targets - but the targeted profits in the new year fall short of experts' expectations. That is why CEO Sanjay Brahmawar has now imposed a cost-cutting program on the group, to which jobs will also fall victim. Demand for the company's own software for use over the network from the cloud is going better than the managers themselves thought, according to the information from Tuesday evening - here is now to invest more to push the offerings further. The share was around 1.7 percent below the Xetra close on the Tradegate trading platform after trading hours.

Brahmawar and the new CFO Daniela Bünger have set the profitability targets for the new year initially low. Adjusted for special effects and before interest, taxes and goodwill amortization, operating profit is expected to be between 16 and 18 percent of sales. This is less than the 18.6 percent achieved in the previous year and also less than experts had estimated. According to a survey conducted by the company, they had calculated that this figure would be close to 20 percent. Before Software AG acquired Streamsets last year, Brahmawar had even forecast a margin of 25 to 30 percent in the medium-term planning for 2023.

Management is now countering this with a savings program that is expected to contribute around 30 to 35 million euros to earnings. With 200 employees, around four percent of full-time positions will be affected by the job cuts. "We will focus even more on the cloud, drive application and data integration and increase operational efficiency to become a leaner company," Brahmawar said, according to the statement. The economic environment is difficult, he added. Recently, many technology companies had cut jobs to reduce costs, including software companies such as Salesforce, Microsoft and SAP.

In the fourth quarter, the Darmstadt-based company made up ground in terms of growth. Overall sales climbed by an unexpectedly strong 30 percent to 303.8 million euros, also thanks to a boost from the weak euro and an acquisition. In the end, product sales were up 7 percent for the year on a currency-adjusted basis, excluding the acquisition of Streamsets, which was the last valid lower end of the forecast range.

However, the driver of the favorable development at the end of the year was once again not primarily the declared growth division Digital Business, but the database business Adabas & Natural. This business also recorded above-average growth in software bookings.

Earnings before interest, taxes and goodwill amortization, adjusted for special effects, rose by 29 percent to 58.3 million euros in the fourth quarter and thus fell short of market expectations - especially when looking at profitability. Compared to the same period of the previous year, the corresponding margin fell slightly by 0.1 percentage points to 19.2 percent - analysts had on average expected a figure of over 21 percent. The acquisition of the Streamsets company had a negative impact, they said.

The Darmstadt-based company posted an adjusted net loss of 14.3 million euros in the quarter, compared with 34.8 million euros a year earlier. For the year, adjusted net income slumped by more than half to 48.9 million euros.

Brahmawar wants to focus sales more on products that have been performing well recently. For example, integration programs such as Webmethods and Streamsets are to be sold even more strongly as cloud versions. The manager also wants to direct additional resources into the cloud data integration and application integration areas. The sales department is to work in a more specialized way, starting with the large North American market, in order to become more powerful. In the database division Adabas & Natural, the shift to subscription models is to be continued.

In the Digital Business with its integration programs, the Executive Board's forecast is for growth in annual recurring revenue of 10 to 15 percent on a constant currency basis. This refers to revenues derived from subscriptions or ongoing maintenance contracts. In the case of the traditional database division Adabas & Natural, the company is more or less assuming stagnation; here, annual recurring revenues are expected to settle in a range between minus and plus two percent compared to the previous year. Overall, product sales are expected to grow between 6 and 10 percent on a currency-adjusted basis./men/jha/