CIMdata PLM Industry Summary Online Archive
23 April 2008
Financial News
ESI Group Announces its Consolidated Full-Year Results to 31 January 2008
Consolidated figures - IFRS
€ millions |
FYR 2007-08 year to 31 January 2008 |
FYR 2006/07 year to 31 January 2007 |
% change |
Total revenues of which Licences and maintenance of which Services |
68.9 53.9 15.0 |
66.0 53.2 12.8 |
+4% +1% +16% |
Gross profit Gross margin (%) |
49.9 72.5% |
48.2 73.0% |
+4% |
Operating profit Operating margin (%) |
5.7 8.2% |
5.6 8.5% |
+1% |
Financial profit (loss) |
(2.4) |
(1.6) |
- |
Attributable net profit Net margin (%) |
2.3 3.4% |
2.4 3.7% |
(5%) |
Year to 31 January
Acceleration in growth by volume
As announced on 11 March 2008, full-year revenues for the 2007-08 financial year totalled €68.9 million, up +4.3% year-on-year or +8.5% at constant exchange rates. This organic revenue growth comprises moderate growth in the Licences business of +1.4% in real terms and +5.8% in volume, and very sound growth for the Services business of +16.3% in real terms and +20.0% in volume.
81% of revenues were generated outside France.
· Improvement in operating margin at constant exchange rates
Operating profit came to €5.7 million or €6.6 million in volume, stable in real terms compared to 2006-07 but up +18% at constant exchange rates. Operating margin was therefore 9.3% at constant exchange rates and 8.2% in real terms. This more or less stable margin was a result of:
- a significant impact of the unfavourable development of exchange rates which cut down the Group's revenues by €2.8 million;
- a product mix effect on gross margin despite significant improvement in gross margin on Services activities;
- continuing control of Research and Development costs, which represented 29% of Licences revenues compared with 30% in 2006-07, as well as general operating expenses (down 1.7%);
- growth of 8.2% in sales and marketing expenses, in particular as a result of increased commercial investment in order to build up local teams.
· Significant improvement in cash and operating cash flow
After interest expenses of €0.76 million, currency losses relating to the unfavourable development of exchange rates (in particular the US dollar and the Korean won) of €1.67 million and a tax charge of €0.88 million, attributable net profit was €2.3 million.
In parallel, ESI Group generated €3.4 million of cash, mainly as a result of improved management of its working capital requirement. Operating cash flow therefore increased significantly to €6.2 million. Available cash at 31 January 2008 stood at €13.1 million.
The Group's financial position remained solid, with an indebtedness ratio (long-term financial debt over shareholders equity) of 8.4%.
Key points
§ Moderate growth in the Licences business reflects the ongoing transition from first-generation solutions to second-generation solutions, as well as the economic slowdown at the end of the year. However, growth remained robust in both emerging products and new business, notably with mature products enjoying further success among new clients;
§ The increase of the Services business, indicates growing demand among industrialists for integrated solutions offering strong added value, as well as interest from new operators for realistic simulation;
§ The unfavourable development of exchange rates accentuated under contrasting economic conditions in the United States in particular in the second half of the year;
§ The adoption of new solutions amplified among major clients: ESI Group continued to strengthen its position among major OEM clients such as VW, Renault-Nissan, Hyundai and Thalès-DCNS by rolling out new solutions. This illustrates the relevance of ESI Group's strategic position, which consists of supporting the changeover to Simulation Based Design (SBD) by offering a range of applications covering all aspects of realistic simulation and available in an open environment (VisualDSS) compatible with clients' best practices;
§ Continuous control of Research and Development costs and G&A expenses and the impact of currency effects allowed for costs to remain stable over the period;
§ The 8.5% increase in the total number of employees includes the perimeter effect related to the consolidation of staff in China over the full year in 2007-08. However, by focusing new hires in low-cost countries such as China, India and the Czech Republic, average staff costs were reduced by 6% over the period;
§ The commercial structure strengthened, with the appointment of new general managers in Spain, Germany, Japan and China and the building up of local support teams; the positive effects of these investments in terms of revenues should begin to be seen in 2008-09;
§ Group's cash position significantly improved thanks to cash flow generated over the period, up €8 million (€6.2 million vs €-1.8 million in 2006-07).
Alain de Rouvray, Chairman and Chief Executive Officer of ESI Group, concludes: "2007-08 was characterised by the continuing transition phase in the Licences business, while the Services business saw a strong growth. In addition, operational margin remained stable relative to last year but grew up by 18% in volume. The Group’s fundamentals remain solid. We have strengthened our financial position thanks to cash generation of €3.4 million and our strategy keeps being confirmed by the continuing roll-out of our solutions at major clients. Despite the prevailing uncertain economic conditions, we are confident about improving our performance over the current fiscal year. Indeed, we expect to see the positive effects of commercial investments carried out in 2007-08, as well as continuing strong growth in the Services business. Net margin should also benefit from a more effective currency hedging. Therefore, operating margin is expected to reach 10% of 2008-09 total revenues.
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