Report of the Executive Board
Dear shareholders and business partners,
The past fiscal year, 2011, was very eventful for REALTECH; a lot happened and we have triggered some highly promising developments. The most important developments include internal restructuring, a sales and distribution agreement with SAP, the sale of the Spanish subsidiary, preparations for expansion towards Northern Europe and personnel changes on the Executive Board.
In 2011, we have concentrated above all on restructuring our overall organization and on systematically optimizing our range of products and services. For example, REALTECH has streamlined its portfolio in the Consulting business area and geared it towards particularly profitable business areas. We have additionally invested considerable amounts in research and development in the software segment as well as in marketing our software products – 22 percent more than in 2010. The reason for this is the OEM contract that we concluded with SAP in 2011. Based on this agreement, SAP will be integrating selected REALTECH technologies into its own products, which is why we are again expanding our theGuard! software.
In addition to this, it was quite apparent in the year under review that there continues to be a high demand for well-trained specialists in the IT sector. Although the fluctuation rate among our employees rose, we were able to gain further highly qualified specialists again in 2011. This can be attributed to the fact that REALTECH is considered to be an attractive employer for IT specialists. Our employees benefit from our flat hierarchies, which enable them to get actively involved, and we place great value on extensive training and professional development. As a result, REALTECH’s competent, dedicated and reliable employees, with their specialist knowledge and high motivation, work each day to make our business a success and ensure that customer satisfaction is one of our most convincing competitive advantages.
There were also some staff changes on the Executive Board in 2011. The previous Chief Executive Officer, Nicola Glowinski left the company at his own request on August 1. The Supervisory Board appointed Dr. Rudolf Caspary, who had up to then been responsible for the software segment and the area of technology and had already been a member of the Executive Board since 2004, to succeed him as head of the company. Moreover, Thomas Mayerbacher became the new Chief Financial Officer (CFO) of REALTECH AG at the beginning of the 2011 fiscal year.
Group revenue on a par with the previous year
Let us now turn to the most important key figures of fiscal year 2011: Group revenue, at EUR 39.2 million, was pretty much on a par with the previous year. In the two business areas of Consulting and Software, sales revenues declined slightly by 1 percent to EUR 26.4 million and EUR 12.7 million respectively. A clearer reduction, in contrast, was recorded for income from operations (EBIT). The decline in earnings from EUR 4.2 million to EUR 0.2 million was due not only to the investments in the software segment mentioned above, but also to various other factors: lost revenues as a result of the earthquake catastrophe in Japan in the first half of the year, poor sales in New Zealand, reduced capacity utilization among our consulting experts in Germany, increased special effects due to vacancies in the REALTECH building in Walldorf and general restructuring costs in the area of human resources. Moreover, some of the software revenues originally scheduled for the fourth quarter of 2011 have been postponed to 2012. We were nevertheless able to increase our net income from minus EUR 1.4 million to EUR 0.9 million, as there was a substantial reduction in our income tax expenses and we recorded one-off income as a result of selling our Spanish subsidiary.
As the former REALTECH subsidiary in Spain has been sold, it has already been deducted from the figures for fiscal years 2011 and 2010. The sale of the Spanish subsidiary as part of a management buyout was necessary to improve the future profitability of the Group as a whole. A long-term trademark licensing and cooperation agreement with the new management ensures that obligations to customers and partners continue to be met.
This means that REALTECH operates worldwide in the following regions: in Europe with Germany and Portugal, in the USA and in the Asia-Pacific region with Japan, Singapore and New Zealand. Developments in revenues and earnings differed somewhat in these regions in the 2011 fiscal year: In Germany, where we now record 71 percent of our revenues, the revenue figure remained on a par with the previous year. Whereas Portugal and the USA recorded declines in revenues, Asia-Pacific was able to increase its sales revenues despite the environmental catastrophe in Japan. We were pleased to also record an increase in income from operations in this country, while EBIT for the Asia-Pacific region as a whole decreased, as it did in Germany and Portugal. Only REALTECH USA recorded an improvement in income from operations.
Two complementary pillars: Consulting and Software
With its employees and products, REALTECH has ensured yet again in fiscal year 2011 that innovative IT solutions support the business goals of multinational customers in the best possible way. Our range of services is closely aligned with the requirements of customers and is divided into two complementary business areas – technical IT consulting with a focus on SAP, and software products for IT service management.
In the Consulting segment, our consultants work together with customers to develop future-oriented, secure IT environments. The particular unique selling point of REALTECH has for years been its outstanding technical expertise regarding software and system architectures, combined with knowledge of how customers can implement innovative technologies profitably. To supplement this, REALTECH established its Software division and began with the development of its theGuard! product family more than ten years ago. These efforts have paid off, as we now have a globally unique software portfolio for IT management.
Development work in 2011 centered on enhancing theGuard! software in conjunction with the contract with SAP. This work made it possible for parts of theGuard! products to be integrated directly into the SAP systems, thus increasing the range of services provided by certain SAP products: The Walldorf-based corporation will be launching the new solution on the market in 2012 as a software package for IT infrastructure management. In a further joint project with SAP, we are ensuring that theGuard! provides even more specific support for rapidly expanding new technologies, such as cloud computing. Independently of this, we have expanded our IT management solution theGuard! as a whole, for example presenting a new software solution for mobile terminal equipment under the slogan “theGuard! goes mobile”.
In the area of consulting, we further focused our portfolio in 2011 on high-margin segments and now advise IT decision-makers with regard to strategic issues. Our new IT management consulting is geared exactly towards the requirements of IT managers and CIOs and aims to support customers in such a way that they make the right strategic decisions when it comes to implementing new IT infrastructures. Positive responses from customers show us that the offer is going down well on the market.
Our targets
According to forecasts, the global economy is set to expand very sluggishly in 2012. Whereas the Euro zone risks facing a recession due to the debt crisis, economists do actually anticipate an increase in the gross domestic product for Germany. In contrast, the IT sector has much more positive prospects and is expected to expand both worldwide and in Europe. The German IT market is also set to expand again, having already seen above-average growth in software revenue for several years.
Bearing these forecasts in mind, REALTECH plans organic growth in the Consulting segment in the current fiscal year of 2012, especially in Germany and the USA. The new consulting offering for IT decision-makers will help us to achieve higher margins in this business segment, too. In the meantime, we will be continuing to concentrate in the Software division on linking our technologies as well as possible with the new SAP solution. Moreover, we already began back in 2011 to strengthen our sales and distribution activities so as to generate the planned revenue.
What’s more, progress is not only being made on the technical side: On January 1, 2012 we expanded our geographic presence by establishing REALTECH Nordic in Copenhagen, with a view to also marketing our software products in Northern Europe. Denmark is the starting point from which we intend to coordinate further sales and distribution activities in Sweden, Norway and Finland. In addition to Scandinavia, we will in future also be focusing on the Benelux states.
A high priority is being assigned in 2012 to the search for qualified specialists, as REALTECH is planning to hire further new employees. One thing that particularly helps us in our search for suitable candidates is the satisfaction of our existing employees: We now fill numerous job vacancies through personal recommendations and also train employees ourselves.
REALTECH’s dividend policy will in the future maintain a good balance between healthy company growth and the interest of shareholders in receiving a share of profits. At the General Meeting in May 2012, the Executive and Supervisory Boards will thus propose distributing a dividend of 30 euro-cents per share for the net profit recorded by REALTECH AG in fiscal year 2011.
The Executive Board expects business to develop positively in 2012. However, we will again be investing substantial sums in research and development in the software segment, in sales and distribution and in new employees in consulting. Furthermore, our international expansion will lead to increased selling expenses. Based on this situation, we anticipate that the Group will record a revenue of EUR 45 million and EBIT of EUR 3.7 million in 2012. Net income will increase accordingly.
The Executive Board is convinced that REALTECH is in an excellent position to meet the challenges of the future with success. Our strong partnership with SAP and the company’s expansion in economically sound regions abroad will both contribute towards this. Together with REALTECH’s tried and tested range of services, stronger portfolio, dynamic team and clear strategy, this will give rise to a sturdy foundation for achieving further growth in 2012. We thank our customers, partners, employees, Supervisory Board and shareholders for their trust and support.
Yours faithfully,
The Executive Board
