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Christian Klein

SAP Q2 profit falls, revises earnings outlook; to buy back shares

WALLDORF, July 21, 2022

German software giant SAP has posted a decline in earnings for the second quarter, mainly due to reduced revenue from software licences, as well as significant bad debt expenses related to the war in Ukraine.
 
For the quarter ended June, the software company posted a post-tax profit of 203 million euros or 0.28 euro per share, compared with 1.449 billion euros or 1.15 euros per share, reported a year ago.
 
Meanwhile, the company announced a share buyback programme of around 500 million euros ($513 million).
 
Cuts non-IFRS Op profit
In addition, for the full year, the Weinheim-based firm cut its non-IFRS (International Financial Reporting Standards) operating profit amidst war in Ukraine and a potential continued marked decline in software licences revenue.
 
Non-IFRS profit after tax was at 1.093 billion euros, versus 2.214 billion euros, year-over-year basis.
 
Operating earnings were at 673 million euros as against 984 million euros of previous year period.
 
Drop in non-IFRS Op Income
The company's non-IFRS operating income dropped to 1.680 billion euros, from 1.992 billion euros of 2021.
 
SAP registered total revenues of 7.517 billion euros, higher than 6.669 billion euros, on year-on-year basis.
 
Revenues from software licences fell to 426 million euros from 650 million euros during the corresponding period last year.
 
Looking ahead, for the fiscal 2022, SAP now expects its non-IFRS operating profit at constant currencies to be in the range of 7.6 billion euros -7.9 billion euros, lower than its previous view of 7.8 billion euros - 8.25 billion euros.
 
More relevant
“As our Q2 results demonstrate, SAP’s portfolio is more relevant than ever. Our transition to the cloud is ahead of schedule and we have exceeded topline expectations, with cloud revenue becoming SAP’s largest revenue stream. Our pipeline is strong, and we are winning market share underpinned by the very strong 100% growth of S/4HANA current cloud backlog,” said Christian Klein, SAP CEO.
 
The group has also reiterated its mid-term target to achieve double-digit operating profit growth in 2023.
 
Luka Mucic, CFO, said: "This quarter, we have recognised the main impact of the war in Ukraine. We believe that we are now able to capitalise on our substantial growth investments of the last 18 months, by delivering sustained growth and profitability expansion."
 
SAP also announced a new share repurchase drive of around 500 million euros. The repurchased shares will primarily be used to service awards granted under share-based compensation plans for employees, the company said in a statement.
 
Highlights
•Cloud revenue up 34% and up 24% at constant currencies to become the largest revenue stream
•Current cloud backlog exceeds €10 billion, up 34% and up 25% at constant currencies
•SAP S/4HANA current cloud backlog extends its growth trend, up 100% and up 87% at constant currencies
•Cloud gross profit up 39% (IFRS), up 38% (non-IFRS) and up 28% (non-IFRS at constant currencies), leading to a strong cloud gross margin expansion
•IFRS operating profit down 32%, non-IFRS operating profit down 13% and down 16% at constant currencies, primarily due to the impact of the war in Ukraine
•SAP reaffirms 2022 revenue and free cash flow outlook, updates operating profit outlook range.-- TradeArabia News Service
 



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