SAP Shareholders Back Company’s New Direction

SAP shareholders supported the new direction but were concerned about the spate of changes at the top.

On May 21, 2014, about 3,500 shareholders, shareholder representatives, and guests gathered at the SAP Arena in Mannheim, Germany, for the Annual General Meeting of Shareholders.

SAP’s strong results certainly put investors in a sunny mood. They approved Jim Hagemann Snabe’s transition to the Supervisory Board and the company’s conversion to an SE. However, the recent changes on the Executive Board and Snabe’s transition to the Supervisory Board without the usual two-year cooling-off period briefly dampened the atmosphere.

“We are on track”

Co-CEO Bill McDermott began his address by thanking employees for their “hard work and dedication,” which had made the company’s success in 2013 possible. That resounded well with the investor representatives, who also acknowledged employees’ key contribution in their speeches later on.

McDermott gave an upbeat review of 2013: “Looking at our 2013 results, SAP had a very successful year of profitable growth.” Results had shown that focusing on the cloud market was the right strategy, he said. Although that had meant pushing back to 2017 the ambitious target of having a 35 percent margin, investors were sympathetic and described it as a foresightful move in the question session.

In the past four years, SAP had increased its software and cloud subscription revenue by 93 percent, SSRS revenue by 71 percent, and its operating profit by 88 percent. Employee engagement had improved by eight percentage points to 77 percent.

Today, more than 36 million people are using cloud solutions from SAP and 1.5 million companies traded over half a trillion U.S. dollars of goods and services through the Ariba network, said McDermott.

SAP HANA is also driving growth. In the past three years, it brought in EUR 1.2 billion in software revenue. In 2013 alone, SAP HANA had generated EUR 664 million in revenue at constant currencies, an increase of 69 percent year over year, he reported. “SAP HANA is one of the fastest growing products in the history of enterprise software,” McDermott said. He also reminded shareholders that with software revenue growth of two percent at constant currency the company’s core business remained healthy and highly profitable: “This is a very important metric that proves we can expand into the cloud and deliver growth in our core software business.”

The company’s direction could not be clearer, he said. Quoting Mannheim’s legendary soccer manager, Sepp Herberger, he said: “The ball is round.” The facts were clear, and SAP had a clear strategy to stay ahead. Customers no longer accepted complexity. They needed solutions that were easy to consume. That was why SAP was helping them to run more simply to make it easier for them to grow.

Dividend and stock price

There was more good news for investors: They will participate in the profitable growth the company delivered in 2013. They approved the proposed dividend of EUR1.00 per share, which was an increase of 18 percent on last year’s dividend. McDermott also talked about the performance of SAP’s stock in 2013. The stock price had increased 2.7 percent. In the same period, the DAX had advanced 25.5 percent. The reason was the company’s shift to the cloud business model, the significance of which had not gone unnoticed by the stock markets.

Changes at the helm

Plattner also took the time to thank ex-Executive Board member Vishal Sikka, who recently left the company for personal reasons, for his “huge support and passionate commitment to SAP.” He was the trailblazer who brought about and nurtured SAP’s intellectual renewal, Plattner said.

Plattner also welcomed Robert Enslin (Sales) and Bernd Leukert (Products & Innovation) to the SAP Supervisory Board, and wished them every success in their new roles. Both took the opportunity to introduce themselves to the shareholders. Enslin thanked the Supervisory Board for the confidence and trust it had placed in him. Leukert said he was honored to be able to serve 20,000 “world-class developers” and reiterated that SAP was currently going through a period of change and reinvention. He also reminded the shareholders that the company’s success would not be possible without the hard work and dedication of its employees.

All of the speakers expressly thanked departing Executive Board Member Werner Brandt for his many years of successful service to SAP. Highlighting the fact that Brandt as CFO had stepped in several times as interim chief human resources officer and labor relations director, Plattner remarked that Brandt stood for “continuity, dependability, and vision.”

Turning to his own person, Plattner responded to rumors that he was unduly influencing company management. “When it comes to the day-to-day running of the company, I only act as an advisor. And as chairperson of the Supervisory Board, I only ever act within the rights and obligations associated with that role.” He added that he naturally follows the company’s development very closely, and often talks to employees personally to get a feel for the mood in the company.

Shareholders approve company direction, ask critical questions

As at every shareholder meeting, an important part of the proceedings is when the shareholders have the chance to quiz the management.

Jella Benner-Heinacher, representative of DSW, one of the German shareholders associations, wondered if SAP had any plans to appoint a new chief HR officer. Lars Labryga of shareholder association SdK, asked for more details about the changes in SAP’s top management. Hans-Martin Buhlmann, chair of VIP, which is an association of institutional shareholders, thanked SAP employees and asked about succession planning for the Supervisory Board chair. The investor representatives wanted to know more about SAP’s cloud strategy, employee engagement, and women on the company’s management boards. They also asked how profitable recent acquisitions are.

SAP HANA in action

A film about Germany’s National Center for Tumor Diseases (NCT) in Heidelberg showed investors how SAP HANA is already changing people’s lives. For the first time, the Center’s researchers and doctors are able to analyze cancer research and treatment data together, which enables them to identify groups of patients for new types of therapy. This is particularly significant when conventional treatments are unlikely to help.

The German Football Association is also getting innovative with SAP HANA. In a video message, SAP Brand Ambassador Oliver Bierhoff said the new technology would be in action at the FIFA World Cup in Brazil. McDermott latched on to this pass, saying he was sure SAP and the Germany team would both do well, and wished Germany the best of luck against Team USA at the World Cup.

Markets have confidence in SAP’s management team

SAP has been included in the 2014 All-Europe Executive Team ranking published by Institutional Investor Magazine. SAP took four top prizes in the technology and software category. Buy-side institutional investors named Bill McDermott and Jim Hagemann Snabe best CEOs, and Werner Brandt best CFO. The SAP Investor Relations team and their manager Stefan Gruber were also honored. This year’s ranking was based on a survey of about 2,000 portfolio managers, investors, and analysts. On hearing the news, Gruber said: “The award reflects the confidence the markets have in SAP’s management team.”

Photo: SAP AG

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