SAP's NZ unit posts record sales as parent makes push into cloud

Tuesday 24th June 2014

SAP New Zealand, the local unit of the world's biggest business management software company, posted a 32 percent jump in sales last year to the highest in more than a decade on growth in its traditional enterprise applications.

Sales rose to $119.8 million in calendar 2013, from $91.3 million a year earlier, according to the company's annual report. Profit jumped 63 percent to $10.4 million as revenue growth outpaced a 19 percent gain in expenses.

The New Zealand business has so far avoided the impact felt by its German parent of the shift to cloud-based computing services, which has allowed smaller rivals such as San Francisco-based Salesforce.com, which inked a deal with Microsoft in May, to win sales of software delivered over the internet. SAP, which has 24 percent of the business management software market according to Gartner, has responded with a concerted push into cloud-based services. In April it posted quarterly sales of 3.7 billion euros, missing analyst estimates.

The local unit is also investing in new technologies, such as cloud, mobile and real-time analytics, said SAP NZ managing director Graeme Riley. In 2013, "we saw particularly strong growth in our applications and enterprise mobility portfolio, as more organisations look to better engage their customers and employees with consumer-grade user experiences," he said.

SAP's New Zealand customer list is a who's who of major corporates and government agencies, including Fonterra Cooperative Group, Telecom Corp., Contact Energy, the Inland Revenue Department and the New Zealand Defence Force. Sales last year were the highest since the business began disclosing its financial statements to the Companies Office in 2002.

In 2013, cost of sales climbed 32 percent to $78.9 million. Sales and marketing expenses climbed to $17 million from $13 million, while costs of research and development rose to $8.5 million from $7.5 million.

SAP NZ paid $10.4 million in income tax in 2013, up from about $6.4 million a year earlier. The company paid management and corporate administration fees and royalties of $16.9 million last year from about $12 million in 2012. All up, it paid $32.8 million in transactions with affiliates, almost double the year earlier.

The annual report shows SAP NZ folded its 3-D software subsidiary Right Hemisphere into the company on March 31 this year, having swallowed up the business in 2011 in a deal criticised at the time because the target had been granted an interest-free US$8 million loan from the government.

SAP's stock last traded at 57.12 euros on the DAX 30 and has climbed about 5 percent in the past 12 months, lagging behind a 29 percent gain for Germany's benchmark stock index.

BusinessDesk.co.nz

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