SAP Q1 results: UK and northern Europe show growth

SAP’s priority areas of in-memory database technology, mobile and cloud showing growth in the UK, says EMEA president, Franck Cohen

SAP’s priority areas of in-memory database technology, mobile and cloud are showing significant growth in the UK, says the company’s EMEA president, Franck Cohen.

Russia and Switzerland also contributed relatively strongly to 13% growth in non-IFRS [international financial reporting standards] software and cloud subscription revenue in EMEA, confirmed a company statement. 

But that was more down to the closure of some large deals, said Cohen. The UK market is showing a wider affiliation for what SAP calls its ‘innovation portfolio’ of cloud, mobile and the HANA in-memory database appliance, said Cohen. The UK, Switzerland and Sweden had Q1 growth over 15% over Q1 2012.

“Mobile plus HANA was more than 20% of our software revenue in Q1 in Europe," he said.

One UK SAP customer that has decided to adopt the supplier’s Business Suite on HANA, rather than just do analytics on the in-memory database is Kingfisher, the home improvement retailer, he reported. 

Smyths Toys has also decided on Business Suite on HANA “from day one”, he said.

He confirmed that the supplier has signed up 800 new customers in the first quarter in the EMEA region. Medgulf, a Saudia Arabian insurance firm, and a new customer, has decided to run its ERP on HANA.

Globally, the supplier received €824m in non-IFRS software and cloud subscription revenue in the first quarter, a 23% gain on Q1 2012. 

HANA contributed €86m. Its mobile business had double digit growth, and its annual cloud revenue run rate is close to €900m said the Q1 results statement. Total revenue was €3,601m, up €251m on Q1 2012, an increase of some 7%.

The Asia Pacific and Japan region, however, declined 7%, and overall company operating profit margin was slightly down, at 0.9% or flat (non-IFRS) on Q1 2012.

Other software companies, such as arch rival Oracle, have also registered Q1 weakness. 

Oracle reported revenues down and flat net income for the first quarter of this calendar year. IBM also posted a miss on Wall Street forecasts this month.

“We are not immune to market conditions," said Cohen. “Southern Europe is still struggling. I had hoped we had reached the end of that, so it is a disappointment." 

Italy, Spain and Portugal are well behind northern Europe, he said, where “our pipeline has never been so strong. Companies are cautious on spending but they realise that innovation is the way out of this economic crisis." 

France “has done well in the last few quarters, but not as well as the UK."

And it is not all gloom in southern Europe, he said. Turkey is exhibiting triple-digit growth he said, reflecting GDP growth of 5-6%, and “a lot of large companies wanting to be more global." Energy utilities IGDAS and Energaz are new SAP customers.

The US is leading the way on cloud adoption, with the UK a close follower, said Cohen. The supplier’s cloud offerings include Success Factors for HR and Ariba for procurement, as well as ERP and CRM.

The Americas region increased non-IFRS software and cloud subscription revenue growing by 49%.

"Our industry is at a fundamental transformation point, driven by the convergence of mobile, cloud and big data. SAP’s 25% growth shows that we are not only leading this change but also gaining significant worldwide market share,” said SAP Co-CEOs Bill McDermott and Jim Hagemann Snabe in the Q1 results statement.

In a financial analyst conference call, McDermott highlighted a 31% growth in financial services, which compensates somewhat for “choppy” state spending worldwide.

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