ASSURED 2011

Management Report

 

Assets, Financial Position, and Income of SAP AG

SAP AG is headquartered in Walldorf, Germany, and is the parent company of the SAP Group, which comprises 199 companies. SAP AG is the Group holding company and employs most of the Group’s Germany-based development and service and support personnel.

As the owner of the intellectual property in most SAP software, SAP AG derives its revenue chiefly from software license fees paid by its subsidiaries for the right to market SAP solutions. Directly or indirectly, SAP AG substantially bears the Group’s software development costs.

The SAP AG annual financial statements are prepared in accordance with the German Commercial Code (as amended by the German Accounting Law Modernization Act) and the German Stock Corporation Act. The full SAP AG annual financial report and unqualified audit report is submitted to the operator of the Elektronischer Bundesanzeiger (Online German Federal Gazette) for publication and inclusion in the Unternehmensregister (German Business Register). They can be obtained from SAP AG on request.

Income

The Income Statement uses the nature of expense method and presents amounts in millions of euros. 

SAP AG Income Statement – German Commercial Code Short Version

€ millions

2011 2010
 
Total revenue 6,520 5,594
Other operating income 671 893
Cost of services and materials –2,236 –2,052
Personnel expenses –1,213 –1,058
Depreciation and amortization –246 –208
Other operating expenses –1,966 –2,128
Operating profit 1,530 1,041
Finance income 998 878
Income from ordinary activities 2,528 1,919
Income taxes –625 –417
Net income 1,903 1,502

The total revenue of SAP AG in 2011 was €6,520 million (2010: €5,594 million), an increase of 17%. ProductproductDeliverable software unit that customers can view, install, and renew. revenue increased 16% to €5,323 million (2010: €4,578 million). As in previous years, productproductDeliverable software unit that customers can view, install, and renew. revenue was primarily generated from license fees paid by subsidiaries of SAP AG. The increase in SAP AG revenue was therefore principally the result of the increase in software and software-related service revenue achieved by the SAP Group and increased license fees payable by the subsidiaries to SAP AG. 

SAP AG operating profit increased 47% to €1,530 million (2010: €1,041 million) owing to the growth in revenue. Other operating income decreased €222 million to €671 million (2010: €893 million). The decrease since the previous year is due primarily to a €270 million reduction in gains from currency effects in a less volatile exchange market. 

SAP AG cost of services and materials increased 9% to €2,236 million (2010: €2,052 million). SAP AG cost of services and materials comprises third-party services, including those provided by SAP subsidiaries. SAP AG personnel expenses, mainly the labor cost of the developers, service and support employees, and administration staff employed by SAP AG, increased 15% to €1,213 million (2010: €1,058 million), primarily because more results-based variable compensation was paid out and because headcount increased over the year. Other operating expenses decreased 8% to €1,966 million, due chiefly to the reduced currency exchange rate volatility: Like currency gains, currency losses also decreased. The decrease in losses from currency effects was €272 million. 

Finance income was €998 million (2010: €878 million), an increase of €120 million compared with the previous year. This resulted principally from increases of €143 million in investment income and €37 million in income from profit transfer agreements, tempered, however, by a €71 million decline in net interest income. 

SAP AG income from ordinary activities, which is the sum of operating profit and finance income, increased 32% to €2,528 million (2010: €1,919 million). After deducting taxes, the resultant net income increased €401 million year over year to €1,903 million (2010: €1,502 million). 

Assets and Financial Position

SAP AG Balance Sheet – German Commercial Code Short Version

€ millions

12/31/2011 12/31/2010
 
Assets
Intangible assets 424 380
Property, plant, and equipment 858 799
Financial assets 11,814 11,575
Fixed assets 13,096 12,754
Inventories 3 3
Accounts receivable 2,386 3,259
Marketable securities 400 0
Liquid assets 3,042 1,615
Short-term assets 5,831 4,877
Prepaid expenses and deferred charges 55 64
Deferred taxes 47 45
Surplus arising from offsetting 12 1
Total assets 19,041 17,741
     
Equity and Liabilities
Shareholders’ equity 8,433 7,137
Provisions 780 623
Other liabilities 9,824 9,977
Deferred Income 4 4
Total shareholders’ equity and liabilities 19,041 17,741

In 2011, SAP AG total assets closed at €19,041 million (2010: €17,741 million). A €342 million increase in fixed assets was the result chiefly of additions to financial assets. Short-term assets stood at €5,831 million (2010: €4,877 million), an increase of €954 million compared with the previous year. Included in these numbers are the accounts receivable, which declined €873 million, liquid assets, which increased €1,427 million, and marketable securities, which increased €400 million compared with the previous year. 

SAP AG shareholders’ equity increased 18% to €8,433 million (2010: €7,137 million). Against outflows of €713 million associated with the payment of the 2010 dividend and €246 million for the repurchase of shares for treasury in 2011, there was a €1,903 million increase in net income and an inflow of €353 million from the issuance of shares to service the share-based payment plans of employees and Executive Board members. The equity ratio (that is, the ratio of shareholders’ equity to total assets) increased from 40% in 2010 to 44% in 2011. 

Provisions increased €157 million, primarily as a result of higher reserves for tax. Other liabilities decreased €153 million to €9,824 million (2010: €9,977 million). That decrease arose out of two opposed effects. On the one hand, bank loans and overdrafts decreased €1,000 million because SAP AG paid off outstanding credits it had taken in connection with the SybaseSybaseSAP acquired Sybase in late 2010, broadening the SAP portfolio for enterprise mobility, introducing a complete mobile platform and mobile apps that enable customer access to data stored in SAP software and systems from anywhere and from any device. Sybase acquisition; on the other, its liabilities to affiliated companies increased €770 million, chiefly by reason of subsidiaries’ increasing investments through SAP AG’s centralized management of finance and liquidity. 

Net cash from operating activities increased €1,504 million to €2,922 million in 2011 (2010: €1,418 million) as a result of that inflow from subsidiaries and from better business. 

SAP AG used net cash of €1,151 million in investing activities in 2011 (2010: €2,707 million), a year-over-year decrease of €1,556 million. The outflows were €642 million for property, plant, and equipment and financial assets and €600 million for long-term investments. They were in part offset by inflows of €91 million from sales of property, plant, and equipment and financial assets. The chief reason for the greater outflow in the previous year was capital contributions to subsidiaries in connection with the acquisition of SybaseSybaseSAP acquired Sybase in late 2010, broadening the SAP portfolio for enterprise mobility, introducing a complete mobile platform and mobile apps that enable customer access to data stored in SAP software and systems from anywhere and from any device. Sybase

Net cash outflows from financing activities were €544 million in 2011 compared with net cash inflows of €2,220 million in 2010. The net cash inflows in 2010 were mainly due to raised funds in connection with the SybaseSybaseSAP acquired Sybase in late 2010, broadening the SAP portfolio for enterprise mobility, introducing a complete mobile platform and mobile apps that enable customer access to data stored in SAP software and systems from anywhere and from any device. Sybase acquisition. The dividend distributed in 2011 was €713 million, an increase of 20% compared with the previous year (2010: €594 million). In 2011, SAP AG repurchased shares for treasury in the value of €246 million (2010: €220 million). The inflow from reissuance of treasury shares and the issuance of new shares for share-based payment plans was €353 million. 

At the close of the year, SAP AG held €2,842 million in short-term liquid assets (2010: 1,615 million), a 76% year-over-year increase. 

Risks

SAP AG is subject to materially the same risks and opportunities as the SAP Group. For more information, see the Risk Factors and Risk Management section.

Overview