! SAP GB 98 E / 1-75 für pdf 05.05.1998 11:58 Uhr Seite 1 1997 SAP ANNUAL REPORT ! SAP GB 98 E / 1-75 für pdf 05.05.1998 11:09 Uhr Seite 2 SELECTED FINANCIAL HIGHLIGHTS CONTENTS in millions of DM, unless otherwise indicated 1993 1994 1995 1996 1997 SAP Profile 4 Highlights ‘97 6 Sales 1,101.7 1,831.1 2,696.4 3,722.2 6,017.5 per employee 0.320 0.414 0.419 0.455 0.521 Letter to Shareholders 12 New Dimensions in SAP’s Expanding World 14 Personnel expenditure 466.2 675.2 956.7 1,338.5 2,074.9 as % of sales 42.3 36.9 35.5 36.0 34.5 Supervisory Board and Executive Board 16 Review of Operations 18 Employees at year-end 3,648 5,229 6,857 9,202 12,856 SAP Shareholder Information 28 Development expenditure 267.7 369.6 438.2 588.9 813.3 Employees 34 as % of sales 24.3 20.2 16.3 15.8 13.5 Product Development 40 Net income 146.3 281.2 404.8 567.5 925.4 Products and Services 46 as % of sales 13.3 15.4 15.0 15.2 15.4 Markets 56 Earnings per share (DM) * 1.46 2.78 4.00 5.48 8.87 R/3 Implementation 68 (adjusted according to DVFA/SG ** method) Glossary 74 Cash flow (DVFA/SG ** method) 212.1 386.5 559.0 782.7 1,230.1 as % of sales 19.3 21.1 20.7 21.0 20.4 1997 Consolidated Financial Statements and Annual Financial Statements of SAP AG 76 Balance sheet total 1,306.2 1,749.7 2,218.2 3,367.1 5,070.3 Consolidated Balance Sheets 78 Equity 1,008.6 1,236.2 1,529.5 2,211.3 3,062.4 Consolidated Income Statements 80 as % of balance sheet total 77.2 70.7 69.0 65.7 60.4 Balance Sheets SAP Aktiengesellschaft 82 Dividend per ordinary share (DM) * 0.44 0.85 1.30 1.80*** 2.80 Consolidated Statement of Fixed Assets 84 Dividend per preference share (DM) * 0.48 0.90 1.35 1.85*** 2.85 Statement of Fixed Assets SAP Aktiengesellschaft 86 Investments of SAP Aktiengesellschaft and the Group 88 Notes to the 1997 Financial Statements 90 Independent Auditors’ Report 109 Report of the Supervisory Board 110 Five-Year Summary: SAP Group 112 Addresses 114 Financial Calendar 118 3 * Per DM 5.00 par value share CONTENTS ** German Association for Financial Analysts and Investment Consultants *** In 1996 an anniversary bonus of DM 0.50 was added to the dividend per ordinary and preference share ! SAP GB 98 E / 1-75 für pdf 05.05.1998 11:10 Uhr Seite 4 SAP: PROVIDING A BETTER RETURN ON INFORMATION SAP‘s key focus is to insure that its customers earn “a better return on information.” It SAP‘s component strategy, based on its Business Framework technology approach, represents accomplishes this goal by delivering state-of-the-art information technology solutions which an aggressive evolution in SAP‘s product portfolio. The company is refashioning the R/3 enable customers to meet market challenges, both today and tomorrow. SAP‘s commitment System into a family of integrated components, while simultaneously developing a range of extends to companies of all sizes operating in a variety of industries, thus insuring an enter- independent applications that can be marketed separately. This boosts SAP‘s potential for prise-wide, process-oriented approach to business solutions which enhance the entire value tapping new horizontal and vertical markets. chain. The rapid growth of the company is also reflected in the development of the workforce. At As it strengthens its leadership in the world market for enterprise business software, custom- the end of the year, the SAP Group employed 12,856 people, representing a rise of 40% com- er reliance on SAP continues to grow. According to a recent study by International Data Cor- pared to the previous year. The number of people employed outside Germany rose by 51% to poration, a respected US market research firm, SAP has established a commanding lead in the 7,340 – an increase significantly greater than for Germany, where in 1997, 1,171 new client/server industry, holding a market share of 28%, a figure greater than the combined employees were hired, increasing the headcount by 27% to 5,516. SAP owes its success to the shares of its next five competitors. In the European market for integrated enterprise software, capabilities, performance, and commitment of its employees. The Group is committed to its position is even stronger, with a market share of 41%. Through its subsidiaries, branches, strengthening its unique corporate culture, a culture characterized by respect and mutual or representative offices, SAP is now present in virtually all of the world‘s industrialized mar- trust. SAP nurtures individuality, and provides considerable latitude for innovation and crea- kets. Its products are used in more than 90 countries, representing around 98% of the world‘s tivity to blossom. Teamwork, an open exchange of information, flat hierarchies, and tolerance economic capacity – conclusive proof of SAP‘s global reach. of risk-taking all promote entrepreneurial thinking and actions. The twenty-sixth year of the company‘s history was a highly successful one. Sales revenues grew by 62% to DM 6.02 billion, with 81% of sales made outside Germany. Pre-tax profit for 1997 grew even faster than sales, rising by 72% to DM 1,667 million. Net profit (DM 925 mil- lion) and earnings per share (DM 8.87) grew in line with sales, increasing by 63% and 62% respectively. This vigorous growth was fueled by continued worldwide demand for enterprise business software. The demands of the year-2000 challenge and the coming introduction of the euro had a particular effect on demand characteristics. More than two million users now work with over 13,000 R/3 installations worldwide, while some 1,400 companies use the mainframe R/2 System. A key factor in this global sales success is SAP‘s capacity to constantly develop new and inno- vative solutions. SAP has consistently led the software industry in terms of research and development. In 1997, the company invested DM 813 million – just under 14% of its total sales – in enhancing and developing existing and new products. Users particularly appreciate that SAP is evolving its software in stages and is actively committed to protecting its custom- ers‘ software investments. The current R/3 Releases – 3.1 and 4.0 – are clear evidence of this commitment. With Release 3.1, SAP brought to market a business application package that delivers easier-to-implement Internet features which support all R/3 business processes and can be tailored to individual customer requirements. R/3 Release 4.0, focusing on value chain innovation, supports the entire process chain from point-of-sale to manufacturing and pro- curement. The enhanced functions increase the speed of company-wide logistics, financials and human resources, while other innovations create opportunities for closer cooperation with business partners. 4 5 SAP PROFILE The revolving granite ball in the lobby of SAP’s headquarters in Walldorf symbolizes the company’s international orientation ! SAP GB 98 E / 1-75 für pdf 05.05.1998 11:11 Uhr Seite 6 In its 25th anniversary year, SAP’s successes with its products, services, and customer events were numerous. These efforts and achievements were often recognized and cited by media and other institutions. HIGHLIGHTS ¾97 6 OVERVIEW OF THE YEAR 7 ! SAP GB 98 E / 1-75 für pdf 05.05.1998 11:13 Uhr Seite 8 JANUARY JUNE AUGUST SEPTEMBER : Construction begins on the new Basis Application Center. : Auto industry giants VW and Daimler-Benz close deals for extensive R/3 : SAP America, Inc. and Intel found Pandesic. This joint venture offers an : In a study of German companies listed on the DAX, Upon completion, the new facility will provide space for installations. In November, the largest auto manufacturer in the world, integrated hardware, software, and service solution that enables companies SAP receives an AA rating from the German monthly approximately 1,600 employees. General Motors, will decide to use SAP's financial software company- to conduct business with their suppliers and customers over the Internet. “manager magazin”, putting SAP in first place for the wide. fifth consecutive year. FEBRUARY : SAPPHIRE '97 in Orlando, the user conference hosted by SAP America, : Deutsche Post AG goes live with SAP's Human Resources : The European user conference SAPPHIRE in Amsterdam sets a new again breaks all records with over 12,000 visitors from 65 countries. : SAP America, Inc. announces plans to erect a new component, the largest R/3 Human Resources installation record with over 5,200 visitors from 53 countries. SAP showcases the Intel CEO Andy Grove and Hasso Plattner make the keynote speeches. headquarters for approximately 2,400 employees in in the world. Its tasks include handling payroll accounting Business Information Warehouse and announces plans to introduce Newtown Square, Pennsylvania. Construction costs are for 300,000 German postal service employees. AcceleratedSAP worldwide (a faster, more efficient way to implement R/3). estimated at US $150 million. : SAP and Software AG found a joint consulting enterprise. : Prof. Dr. Hasso Plattner, co-founder and Deputy Chairman of the Exec- OCTOBER utive Board of SAP, receives the renowned “Information Technology : Nearly 3,000 visitors attend the Technology Days in MARCH Leadership Award" in Washington D.C. Prof. Plattner's acceptance Karlsruhe, where Microsoft founder and CEO Bill Gates : SAP’s participation in CeBIT '97, the world's largest infor- speech will become a part of the permanent archive of the National is the keynote speaker.