July 8, 2020 / 9:56 PM / a month ago

SAP says business recovered more than expected in second quarter

FRANKFURT (Reuters) - SAP said on Wednesday its 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.

FILE PHOTO: A man walks past a SAP logo during the company's annual general meeting in Mannheim, Germany, May 15, 2019. REUTERS/Ralph Orlowski

Total revenue in the period increased by 2% to 6.74 billion euros ($7.64 billion). Software licenses - SAP’s cash-cow business that generates much of its profits but is “lumpy” because revenue is recognised up front - slumped 18%, but cloud revenues were up by the same amount.

“Software licenses 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 7% 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,” Chief Financial Officer 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 1%-6% 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% 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

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