Lectra’s Board of Directors, chaired by Daniel Harari, reviewed the consolidated financial statements for the fiscal year 2019. Audit procedures have been performed by the Statutory Auditors. The certification report will be issued at the end of the Board of Director’s meeting of February 25, 2020. (Comparisons between 2019 and 2018 are like-for-like, unless stated otherwise. As the impact of the acquisition of Retviews on the financial statements for the full year is not material, like-for-like changes exclude only the variations in exchange rates).
Q4 2019
In a continuing degraded environment that is unlikely to contribute to an upturn in investment decisions by Lectra customers, orders for new systems (30 million euros), decreased by 9% from Q4 2018 (-8% at actual exchange rates). Orders for new systems had amounted to 27.4 million euros in Q1 of this year, 26.5 million euros in Q2, and 28 million euros in Q3.
Revenues (74.2 million euros) decreased by 2% (-1% at actual exchange rates).
Income from operations (11.2 million euros) was down 10% (-7% at actual exchange rates) and the operating margin (15%) decreased by 1.3 percentage points.
Net income (8 million euros) was down 0.6 million euros (-7%) at actual exchange rates.
Free cash flow amounted to 18.1 million euros (12.8 million euros in Q4 2018).
2019
Acquisition of the company Retviews
On July 15, 2019, Lectra entered into an agreement to acquire the Belgian company Retviews. Founded in 2017, Retviews has developed an innovative technological offer that enables fashion brands to analyze real-time market data and make the best decisions to optimize their collections, increase their sales and margins, thanks to artificial intelligence algorithms.
Positive impact of currency changes
With an average exchange rate of $1.12/€1, the US dollar was up 6% compared to the same period in 2018, while the yuan strengthened by 1% against the euro. Currency changes thus mechanically increased revenues by 5 million euros (+2%) and income from operations by 3 million euros (+8%) at actual exchange rates compared to like-for-like figures.
Challenging macroeconomic and geopolitical environment
In a context of uncertainty and apprehension, the entire year was marked by a very strong "wait-and-see" attitude by many companies, particularly in the fashion and automotive markets. This adverse climate is primarily the consequence of the trade wars between the United States, on the one hand, and Mexico, China and Europe, on the other, as well as the slowdown in the automotive sector, particularly in China.
Earnings in line with revised objectives
Orders for new systems (111.9 million euros) were down 10% relative to 2018. Revenues amounted to 280 million euros, down 3% (-1% at actual exchange rates). Revenues from software licenses, equipment and non-recurring services (110.2 million euros) decreased by 12% and recurring revenues (169.8 million euros) increased by 4%. Income from operations totaled 40.9 million euros and the operating margin 14.6%, down 2.4 million euros (-6%) and 0.4 percentage point, respectively. At actual exchange rates, income from operations rose by 2% and the operating margin by 0.4 percentage point. These results are in line with the Group’s expectations as set out on July 29. Net income totaled 29.3 million euros, up 0.6 million euros (+2%) at actual exchange rates and free cash flow totaled 36.2 million euros (+14.6 million euros).
Greater impact of the sale of software on a subscription basis
As expected, both the volume and the percentage of sales of software sold on a subscription basis (SaaS) increased in 2019. This change to the SaaS model will contribute to the long-term development of the Company’s activities and strengthen its recurring revenues. In the short-term, however, it has a negative impact on revenues and income from operations, as revenues from software subscriptions are recorded progressively over several years. If the SaaS sales in 2019 had been made in the form of perpetual licenses with their associated maintenance contracts, revenues and income from operations would have been higher by 2.8 million euros and 2.9 million euros, respectively. Therefore, at actual exchange rates, revenues would have been stable, income from operations would have increased by 9%, and the operating margin would have totaled 15.5%.
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