SAP CFO confident on 2016 profit goal, signals higher dividend

FRANKFURT (Reuters) - SAP, Europe’s most valuable technology company, is confident it will hit its 2016 profit target based on its order portfolio in the all-important fourth quarter and sees no obstacle to raising its dividend, Luka Mucic, the company’s chief financial officer, said on Wednesday.

The logo of German software group SAP is pictured in Vienna, Austria, July 25, 2016. REUTERS/Leonhard Foeger/File Photo

Mucic told Reuters in an interview that he also planned to keep a tight rein on acquisitions, in line with the 100 million euros ($106 million) it spent in 2016 on small, technology-focused deals.

The company is banking on organic growth in its flagship S4/HANA system, the biggest revamp of its core business planning software in two decades, as it seeks to convert its blue-chip, corporate customers to run their businesses in the cloud.

Mucic said that, based on business two-thirds of the way into its fourth quarter, he was confident the company would meet its full-year guidance for 2016 operating profit, excluding special items, of between 6.5 billion and 6.7 billion euros, at constant currencies. Operating profit in 2015 was 6.3 billion.

By moving to the cloud SAP has created a more predictable business model as contracts for cloud product are signed for years, but software licenses are typically renewed at the end of the year. This makes the fourth quarter SAP’s most important.

“With our third-quarter reporting, we have raised our outlook. This is what we have done, as we are confident about the further course of business this year,” Mucic said.

“Our goal is to increase our profit and dividend. We are confident that our 2016 profit will rise from last year. I don’t see any obstacles for a dividend rise,” he said.

SAP paid 1.15 euros per share dividend for 2015 and has said it aims to continue its policy to pay 35 percent of profit after tax.

Since Mucic took office as finance chief in June 2014, SAP shares have gained almost 45 percent, giving the company a nearly 100 billion euro market capitalization and making it the most valuable company in the German blue chip index.

After spending nearly $20 billion over the past decade on acquisitions - culminating in its $7.3 billion purchase of online travel and expenses company Concur in 2014 - SAP is now looking beyond cloud computing, Mucic said.

SAP is eyeing small acquisitions and partnerships with big industrial companies to prepare the business software maker for new trends such as artificial intelligence, blockchain and machine learning, the finance chief said.

“In these areas it makes sense to look at smaller acquisitions,” he said.

He reaffirmed that large deals such as Concur were no longer on the agenda, even if the new U.S. administration under Donald Trump triggers a wave of large-scale deal-making among its rivals.

“Most of the larger software companies have too much overlap with our activities,” he said.

SAP is also pushing to form partnerships with big industrial players to connect everything from cars and screwdrivers to the internet, a market that is estimated at $250 billion by 2020, according to research by Boston Consulting.

SAP already has such deals in place with Siemens and German car parts maker Robert Bosch [ROBG.UL].

“The idea of cooperating with competitors is new for some manufacturing companies but for software companies this has been normal practice for years,” he said.

(This story was corrects headline to say CFO rather than CEO)

Reporting by Harro ten Wolde; Editing by Maria Sheahan and Susan Thomas