SAP sees Q2 uplift amid pandemic lockdown

Licence revenue "recovered more than expected"
  • Reuters (ARN)
  • 09 July, 2020 06:35

SAP has revealed that business activity gradually improved in the second quarter from the effects of a global lockdown, with revenues and operating profit edging up, and the German software maker confirmed its full-year outlook.

Total revenue in the period increased by two per cent to 6.74 billion euros (US$7.64 billion). Software licences - SAP's cash-cow business that generates much of its profits but is "lumpy" because revenue is recognised up front - slumped 18 per cent, but cloud revenues were up by the same amount.

"Software licences revenue, while still below normal levels, recovered more than expected", SAP said in a pre-released earnings statement, adding that the revenue showed a strong sequential improvement compared to the first quarter.

Operating profit increased by seven per cent to 1.96 billion euros as SAP slowed hiring new staff and cut costs, including by spending less on travel and staging more virtual events.

"Our quick response to the crisis on the cost side drove strong operating profit and margin expansion," SAP CFO Luka Mucic said in a statement.

SAP said it will continue to invest in innovation to emerge from the Covid-19 crisis even stronger. Europe's most valuable technology company confirmed its 2020 outlook for an operating profit, adjusted for special items, in a range of 8.1 billion-8.7 billion euros, a fall of one per cent-six per cent at constant currencies.

SAP had cut its earnings guidance in April after the coronavirus pandemic caused customers to put orders on hold, after having earlier forecast 10 per cent growth.

"The outlook continues to be based on the assumption of a gradually improving demand environment in the third and fourth quarter as economies reopen further and population lockdowns ease", SAP said.

SAP plans to publish full second-quarter earnings on July 27.

(Reporting by Arno Schuetze; Editing by Leslie Adler)