SAP Q1 2024 Results
The financial impact of SAP's restructuring program
CFO Dominik Asam has stated that the IFRS operating profit in the first quarter was impacted by the 2.2 billion EUR restructuring the company is carrying out (the 2024 transformation program), wherein 8,000 positions will be affected. This program resulted in an IFRS operating loss of 787 million EUR. SAP also stated that “non-IFRS operating profit growth was negatively affected by the increase in share-based compensation, predominately driven by the strong share price increase over the course of the first quarter”.
According to Cristof Kerkmann from the German Handelsblatt magazine:
“At around 200 million euros, the restructuring expenses are higher than originally expected. CFO Asam explained this is [firstly due to the fact] that more employees in the USA signed up for the early retirement program [than expected]. Secondly, according to Asam, the company had to pay the departing employees more for their share options due to the high share price.”
How much the restructuring program will cost SAP in the end is still unknown and will likely take some time to calculate.
Profit and share price
SAP has benefitted from a high share price of late. At the end of March the price was around 184,32 EUR, and now it is still holding a respectable position at 166,10 EUR, which is still a 20 percent increase from the beginning of the yearSource: HandelsblattSAP has benefitted from a high share price of late. At the end of March the price was around 184,32 EUR, and now it is still holding a respectable position at 166,10 EUR, which is still a 20 percent increase from the beginning of the year (Source: Handelsblatt). However, this high price has affected other economic aspects at the company. SAP’s profit, on an adjusted basis, is at 0,81 EUR, below the consensus of 0,98 EUR a share.
Asam also stated that their IFRS effective tax rate was much higher this year when compared to the first quarter last year, which has affected their taxes. The changes mainly resulted from a temporary inability to offset withholding taxes in Germany due to tax losses in 2024, resulting from the restructuring program. According to Asam, this adverse impact was partially compensated by changes in non-deductible expenses.
Cloud strategy
Christian Klein appears content with the financial direction the company is going towards, as he states the company is “off to a great start in 2024” and is confident the company will achieve its goals for the year. He presents the growth in cloud revenue as a marker of success for SAP’s cloud-first strategy. Investors seem to agree with his assessment, as the record growth of SAP’s share price shows the amount of faith SAP’s investors hold in his approach.
