Friday 15th January 2021
Share price on the rise
SAP saves itself through the crisis
Last year, the corona crisis surprised SAP. The Walldorf group had to cut its annual forecast twice. This news did not go down well with investors – the share price plummeted. The now published preliminary figures for 2021, on the other hand, are creating a positive mood.
In the current year, the software giant SAP will pay tribute to the ongoing corona crisis and the accelerated transition to becoming a cloud provider. The adjusted operating result could decline by up to six percent, announced Europe's most valuable technology group, citing preliminary figures. At least one percent is expected. SAP assumes that the corona crisis will slowly subside and that demand will "gradually improve" in the second half of the year.
The upcoming IPO of the US subsidiary Qualtrics could also provide momentum. A prospectus for the issue has already been filed on the Nasdaq, according to which Qualtrics is likely to be valued at 12 to 14 billion dollars on its stock market debut.
Last year, the Corona crisis caught the Walldorf Dax group cold. SAP had to cut its annual forecast twice and also give up its medium-term goals. As a result, the share slipped as sharply as it did in 1999. After a solid final quarter, SAP now achieved its own expectations. The adjusted operating profit climbed slightly to 8.28 billion euros. Since the outbreak of the crisis, SAP has exercised cost discipline and is also saving through fewer business trips, lower building costs, and switching to virtual events.
That makes itself affordable: the preliminary business figures were well received on the stock exchange. The price of the SAP share rose before the start of trading by 1.5 percent. The quarterly and full year results were above market expectations, said a stockbroker. The free cash flow of 5.9 billion euros stands out positively. The outlook appears extremely conservative and coincides with the analysts' forecasts.
"Impressive end to the year"
Company boss Christian Klein wants to use the crisis to turn SAP completely into a cloud provider. The Oracle competitor is making progress with the change and has said that despite new lockdowns, the cloud business has managed to "set an impressive end to the year". Cloud revenues rose by 13 percent after adjustment for currency effects, according to SAP also thanks to the high level of acceptance of the new holistic SAP offering among pilot customers.
Like the US rivals Salesforce, Workday or Oracle, SAP is increasingly relying on the sale of more flexible web subscriptions, which are usually paid monthly and not once, which makes sales more predictable. The share of more predictable revenues in total revenues rose in the fourth quarter by around four percentage points to around 65 percent. The final quarter is particularly important for SAP, as many orders are traditionally completed during this period.
In light of declining software license revenues, consolidated sales fell two percent from October to December to 7.54 billion euros, while adjusted operating profit rose by three percent to 2.77 billion euros and the operating margin rose by 1.5 points to 36.8 percent. In the same quarter of the previous year there were high expenses for share bonuses.
Also in the current year, the falling income from the traditional software license business will cap sales growth. While cloud revenues are expected to grow by 13 to 18 percent, cloud and software revenues are expected to grow by no more than 2 percent. In the worse case, they should stagnate after adjusting for currency effects. On January 29th, SAP wants to give a detailed insight into the fourth quarter and the annual figures. Then the sales for 2020 should also be published.
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