Business will take longer than expected to recover from Covid

By Maurice Garvey

Business software group SAP has forecast flat revenue and a decline in operating profit in 2021 after reporting fourth-quarter results that beat market expectations.

Giving an early view of 2020 results and setting 2021 guidance, SAP said adjusted revenue, at constant currency, would be unchanged to up 2 per cent this year, while adjusted operating profit was seen falling by 1 per cent – 6 per cent.

SAP City West 20 1

SAP has offices in Citywest Business Campus

The company was founded in Germany and has premises in Citywest Business Campus and Galway.

SAP’s CEO Christian Klein abandoned his medium-term profit targets last October.

He said SAP would go all-in on its shift to cloud computing, cautioning that business would take longer than expected to recover from the coronavirus pandemic.

That announcement, which came with a third-quarter earnings miss, sparked the biggest drop in SAP shares in a generation, causing the leading provider of enterprise software to lose its mantle as Europe’s most valuable technology company.

SAP’s 2020 revenue exceeded its lowered guidance, while profit hit the high end, the company said in an overnight news release issued ahead of results scheduled on January 29. 

“SAP’s business performance sequentially improved in the fourth quarter even as the Covid-19 crisis persisted and lockdowns were reintroduced in many regions,” SAP said in a statement.

SAP shares have lost more than a quarter in value since their all-time high set last year.

The company said that cloud revenue continued to be impacted by lower pay-as-you-go transactional revenue, however, in particular for Concur, SAP’s expense management app that has been hit by a slump in corporate travel.

That was offset by strength in e-commerce, business technology platform and customer experience sales, as well as wins for SAP’s human resources application SuccessFactors.

“SAP also saw strong early take-up of its new holistic business transformation offering among pilot customers, contributing to the cloud performance in the quarter,” the company said.

SAP said its switch to subscription-based cloud services will boost growth and profit margins in the long term, but weaning itself off the upfront fees that its legacy software licences throw off will create near-term headwinds.

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