German software concern SAP reported a significant profit growth in the second quarter primarily because of its successful cloud business. Operating profit jumped 11% year on year to 1.5 billion EUR. The market leader for business software for corporate governance generates between April and June revenues of 5.24 billion EUR, which net of currency items off an increase of 9%. So SAP cope a little better in terms of operating profit than expected by analysts, according to a poll by Reuters expected a profit of 1.45 billion EUR. At lunch on the Frankfurt Stock Exchange on SAP shares rose 3.8%.
“SAP has never been in a better position”, says CEO Bill McDermott. Some analysts feared that the vote of the British exit from the European Union could confuse business on SAP in the important last week of the quarter as companies probably choking back orders because of uncertainty. “I do not feel any negative effect. Many expected a drop to businesses of many companies because Brexit, and for us, but the opposite happens”, he added.
The company, which is a component of the index DAX, continues to expect strong growth is deemed to be promising cloud business. In it the software is rented over the Internet, rather than buy a license with a higher one-time payment. So cloud software is initially less profitable traditional business licenses. In the second quarter, revenues in this segment reached 721 million EUR – an increase of one third in constant currency compared to the previous year. Meanwhile, SAP has sold 10% more licenses thanks to the new main product S/4hana. So the main business did not suffer so much because lurch customers to the cloud.
So with a strong second quarter company from Walldorf offset the weak start to the year. “With confidence” SAP confirmed its forecast for the year. Overcast division expects to continue posting revenue growth of 2.3 to 3 billion EUR. Along with traditional software SAP intends to raise revenue by 6-8% from last year their level of 17.2 billion EUR. The company expects operating profit in the range of 6.4 to 6.7 billion EUR (compared with a previous forecast of 6.35 billion EUR).