Software AG has announced a share buyback programme in a total volume of up to EUR70 million until 31 December 2015. Based on Software AG's Xetra closing price of 2 September 2015 (EUR24.02) this equals a volume of up to approximately 2.9 million shares. With this press release, the company intends to offer further information on the share buyback programme and answer some upcoming questions.
Software AG has repeatedly obtained the authorisation for share repurchases at the annual general meeting (AGM), and used the last share buyback programme (November 2014 - February 2015) to the following extent.
As of 1 March 2015, Software AG owned an aggregate number of 8 084 101 treasury shares, corresponding to 9.3% of the share capital of Software AG. At the end of April 2015, 7 943 945 of these treasury shares, corresponding to 9.14% of the share capital of Software AG, have been cancelled with a simultaneous reduction of the share capital in the same amount. As of 31 August 2015, Software AG still owns an aggregate number of 61 856 treasury shares, corresponding to 0.08% of the share capital of Software AG.
The cash allocation priority has also been based on dividend continuity and financing acquisitions. Following is further information to the regulatory disclosure:
1) Why a share buyback now?
a. Software AG's cash on the balance sheet, posted after six months in 2015, was roughly EUR424 million (EUR455 million including stocks). The current interest rate level is still on a low level and is in fact below Software AG's historical average dividend yield.
b. Management considers the current share price attractive for a share buyback.
2) Why this amount (EUR70 million)?
The management board has been authorised by the AGM to buy back shares up to 10% of the share capital of Software AG. With the current programme, about 1/3 of this authorisation will be exploited. This volume is more than covered by the expected free cash flow of the next couple of quarters. Therefore the high liquidity for Software AG is ensured.
3) How will the treasury shares be used?
The repurchased shares may be used for any purpose permissible under the relevant shareholders' resolution of the AGM of 13 May 2015 and applicable corporation stock law. The resolution states, besides others, the following purposes:
a. Delivery of shares to the holders of warrants or convertible bonds.
b. The sale to third parties for the purpose of acquiring companies, parts of companies and/or equity interests in companies or in the context of corporate mergers.
c. Servicing of share option programmes.
d. The recall of all or part of the treasury shares with or without reduction of capital.
4) What is the impact of the share repurchase on the earnings per share (EPS) for 2015?
The reported EPS for fiscal 2015 will tend to increase - to the extent that the treasury shares will reduce the current number of shares outstanding.
5) What is the effect of the repurchase programme on the dividend?
a. No effect. Software AG's dividend policy remains unchanged.
b. The dividend policy is geared towards long-term and consistent dividend payment.
c. The current cash-out ratio is in the corridor of 25%-33% of the average of net income and free cash flow.
d. Dividend for fiscal 2015 will be defined on the base of full year 2015 results in spring 2016.
6) What is the effect of the repurchase programme on the acquisition strategy of Software AG?
No effect. Software AG will continue to buy software companies that:
a. Bring technological additions to the product portfolio (technology tuck-ins); or
b. Provide innovative kernels for further organic growth.
7) When will the share buyback programme start?
a. Firstly, Software AG will have to mandate a bank to implement the programme; then
b. Before the programme begins, an additional communication will be issued to the capital market.
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