CIMdata PLM Industry Summary Online Archive
26 April 2012
Financial News
ESI Group - Increase in 2011/12 Annual Results
Alain de Rouvray, ESI Group’s Chairman and CEO, comments: “Our 2011/12 financial year was marked by accelerated adoption of our virtual prototyping solutions by key accounts. Furthermore, the successful integration of IC.IDO validates our external growth strategy. We have again improved our current operating profitability and continue to have total confidence in our business model. With a very healthy financial situation and a high financing capacity, ESI is entering a new stage in its development, combining external growth and organic growth whilst improving its profitability.”
Robust growth in revenue and Licenses activity
As announced on March 21 2012, consolidated annual revenue saw growth of +11.9%, with business volume at €94.2 million.
The key indicators were positive over the financial year:
· License sales increased by +11.2%,
· The License installed base was up +10.5%,
· License repeat business remained at a very high rate of 87.4%,
· License New Business grew +21.8% to €15.9 million,
· Services sales were up +13.9%, at €25.4 million.
Gross margin stable at 70%
The gross margin remained stable at 70% of sales, despite the increasing proportion of services business. The differential growth of the activity mix reflects increased Services as ESI Group’s teams support implementation of methodological changes by our customers.
Improvement in EBITDA
EBITDA totaled €10.5 million, an increase of +17.1% over the previous fiscal period; in 2011/12 the EBITDA margin was 11.1%, up from 10.6% in 2010/11. There was a €0.2 million perimeter impact resulting from the Group’s acquisitions but this is not significant given the short consolidation period over the year (IC.IDO was integrated on August 24, 2011 and Efield on December 9, 2011). Organically (excluding the scope effect), the EBITDA margin improved to 11.3%.
Control of costs structure
In 2011/12, ESI Group maintained its high level of R&D investments, which were up +7.1% in volume and represented 27.2% of Licenses sales compared to 28.2% the previous year. R&D costs were up +5.2%, of which only +0.4% was organic.
Sales & Marketing costs increased by +9.8% to €28.8 million, or 30.6% of sales compared to 31.2% the previous year. Organically, the increase was just +6.7%.
General and Administrative costs were up +12.4% at €11.9 million, compared to €10.6 million in 2010/11 and +10.4% organically. This increase was notably due to structural IT expenditure.
Improvement in current operating profit
Current operating profit increased by +27.4% to €10.3 million. The 2011/12 current operating margin improved to 11.0%, versus 9.6% in 2010/11.
Increase in attributable net profit
Attributable net profit increased by 10.4% to €6.0 million, compared to €5.4 million in 2010/11. Net profitability was affected by a higher tax burden than in 2010/11, which is now closer to the normative level. All in all, the 2011/2012 net margin was almost stable at 6.4%.
Sound financial structure and strengthened financial capacity
The Group had €7.7 million in available cash at the end of the financial year, an increase of €0.9 million over the year. The financial structure remains very solid, with gearing (long-term financial debt over shareholders equity) of 17%. The increase in gearing (from 6% at the end of 2010/11) is the results of an initial drawdown on the syndicated loan renewed in November 2011. This 30 million euro 7-year credit line illustrates the confidence that the banking community has in the Group with its acquisition strategy.
At January 31 2012, ESI Group held 7.25% of its own capital.
Key points and recent events
· Sharp increase in activity from key industrial accounts and continual upramping of BRIC countries
Revenue from our top twenty clients increased by +24% over the year, twice the global growth. This emphasizes the fact that ESI Group’s major clients, who already have a substantial number of licenses installed, are also those who are preparing for significant acceleration in their use of end-to-end virtual prototyping solutions to support development of key product elements. BRIC countries (Brazil, Russia, India, China) now represent 11.5% of sales booking, compared to 10.3% in 2010/11. This increase reflects the intention of these new and fast-growing economies to commit to offer high-quality, innovative products at competitive prices. The systematic integration of virtual prototyping is proving to be crucial to good decision-making within the ‘product/process’ production cycle, while strengthening the technological contribution and sustaining the competitive advantages of low labor costs.
· A need for increasingly complex innovations in all sectors
Faced with heightened global competition and increasingly strict regulations, the automotive sector is continuing to see in ESI Group’s solutions a major opportunity to strengthen its competitiveness through innovation, specifically in the context of acceleration in the launch of new models that are more fuel-efficient and ecological. The Transport sector was thus responsible for 56% of all orders taken by the Group, reflecting a +15% increase in volume. Also affected by global competition and regulatory constraints, the Aeronautical sector has also increased substantially, by +38%, and now accounts for 8% of our orders. The use of new materials such as Composites is necessitating changes in design and manufacturing processes, introducing new uncertainties and making the use of virtual prototyping solutions essential.
Outlook
ESI Group has instigated an ambitious development plan, combining organic growth and external growth with improvement in profitability, which is expected to result from the following leverages:
· increasing demand for virtual prototyping from key industrial accounts and their direct suppliers;
· controlled increase in costs amplified by acquisition synergies;
· the choice of acquisition targets with an accretive margin structure.
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