Review of Operations Review of SAP's Group Operations Finances FINANCES
CASH FLOW AND LIQUIDITY
Operating Cash Flow Grows 15%
Our sound income position in 2006 had a positive impact
on cash flow. After a decline in 2005, operating cash flow
increased 15% to €1,847 million in 2006 (2005: €1,608 million;
2004: €1,845 million) because of greater net inflows associated
with net income.
In 2006, net cash used in investing activities was €134 million, once again significantly less than the 2005 amount, which was €583 million (2004: €748 million). Outflows increased for acquisitions and – reflecting continuing building activity at our headquarters and in the United States and India – for property, plant, and equipment. Nonetheless, there was a net inflow from short-term, equity, and other investments, arising out of their partial liquidation and reallocation between such investments and cash and cash equivalents. Our financing activities accounted for €1,375 million net cash outflow in 2006. That is 148% more than the previous year’s figure of €555 million (2004: €388 million). The increase was caused by a rise of 31% in the amount of dividend distributed (2006: €447.2 million; 2005: €340.4 million; 2004: €248.7 million) and a rise of 153% in the outflow for treasury stock purchases (2006: €1,149 million; 2005: €454 million; 2004: €175 million).
Group Liquidity Declines 13%
Cash and cash equivalents stood at €2,399 million at the end
of the year, an increase of 16% (2005: €2,064 million; 2004:
€1.506 million). Our Group liquidity, comprising cash and
cash equivalents as well as short-term investments, totaled
€3,330 million (2005: €3,846 million).
To increase financial flexibility, in November 2004 we obtained a €1 billion syndicated credit facility through an international group of banks. We already had other lines of credit in place; the new line was arranged to provide additional Group liquidity options. We did not draw on the facility during the year and have no current plans to do so.
At the end of 2006, the other, bilateral lines of credit available to SAP AG totaled approximately €599 million (2005: €553 million; 2004: €622 million). We did not draw on these facilities during 2006, 2005, or 2004. Several subsidiaries in the SAP Group had credit lines in their local currency. These totaled some €109 million (2005: €218 million; 2004: €204 million), for most of which SAP AG was guarantor. At the end of the year, the subsidiaries had drawn €26 million under these facilities (2005: €24 million; 2004: €28 million).
We do not currently have a credit rating with any of the rating agencies. Our debt ratio is low, at 35% (2005: 36%; 2004: 39%), and we do not believe any change in credit conditions that might be obtained with a rating would have a substantial effect on our financial situation. Our liabilities comprise 7% pension liabilities (2005: 6%; 2004: 5%), 49% other reserves and accruals (2005: 56%; 2004: 59%), and 30% other liabilities (2005: 26%; 2004: 25%).