SAP’s headline positive results statement (https://news.sap.com/2019/07/sap-announces-second-quarter-and-half-year-2019-results/) reveals double-digit growth across cloud, software revenues and total revenue, and cloud gross margin rising sharply.
- Cloud Revenue Up 40%
- Cloud Gross Margin Up 4 Percentage Points
- Cloud and Software Revenue and Total Revenue Up 11%
- Qualtrics Experience Management Solutions Drive Fast Growth in Customer Experience and Employee Experience
- SAP S/4HANA Momentum Continues, Growing to More Than 11,500 Customers
- Operating Profit (IFRS) Down 21% Due to Ongoing Restructuring and Significant Share Price Increase
- Operating Profit (Non-IFRS) Up 11% Benefitting from Operational Discipline and Increased Cloud Efficiency
Bill McDermott comments “SAP delivered double digit growth in total revenue, cloud revenue and non-IFRS operating income. Qualtrics is growing fast as the global standard in the Experience Management category. As shown by our rising cloud gross margins, we are progressing nicely in our ambition to be the Best-Run SAP. With XM driving the CEO digital transformation agenda, we resolutely reaffirm our full year guidance.”
CFO Luka Mucic expanded on this with a note about the impact from the US-China trade frostiness “I am pleased that our operational excellence measures are already showing effect. Our non-IFRS operating profit and margin performance is remarkable considering the margin headwinds from our latest acquisition and the recent short-term trade-related uncertainty in Asia that impacted our software revenue performance in the region. With continued strong customer demand and our tight focus on profitability we remain as confident in our 2019 outlook as we are in our mid-term ambition.”
However, the comment about margins not improving this year and the reported 21% drop in IFRS operating profit seems to have been below what was expected, with the share price taking a hit, despite McDermott’s positive commitment to growing margins by 5% over the next three years.
Shareholders shouldn’t be too despondent though as 2018 dividends of €1.50 per share were already up against the previous year (€1.40) and there seems confidence that they will hit the expected numbers for the full year.
SAP – the Experience Company
If you hadn’t noticed, SAP is now clear on its new positioning:
“As the Experience Company powered by the Intelligent Enterprise, SAP is the market leader in enterprise application software, helping companies of all sizes and in all industries run at their best: 77% of the world’s transaction revenue touches an SAP system. Our machine learning, Internet of Things (IoT), and advanced analytics technologies help turn customers’ businesses into intelligent enterprises. SAP helps give people and organizations deep business insight and fosters collaboration that helps them stay ahead of their competition. We simplify technology for companies so they can consume our software the way they want – without disruption. Our end-to-end suite of applications and services enables more than 437,000 business and public customers to operate profitably, adapt continuously, and make a difference. With a global network of customers, partners, employees, and thought leaders, SAP helps the world run better and improve people’s lives.”
Their Strategy and Business Model also states:
“This strategy represents an expansion of the Intelligent Enterprise to include a new category called Experience Management. Experience Management focuses on obtaining and tapping into the value of outside-in customer, employee, product, and brand feedback in real time to continuously improve the experiences businesses deliver.”
Board Equality achieved
It’s also positive to see that, after the election of five women to the Supervisory Board earlier this year, 50% of the 18 Supervisory Board members are now women.