Improvement in profitability: Significant
increase in EBIT and Net Profit
- Gross Margin Improvement
- Sustained R&D investment
policy
- Impacts of the operational cost
control policy
- Positive business momentum for
2015
Regulatory News:
Alain de Rouvray, ESI Group’s (Paris:ESI) Chairman and CEO,
comments: "The significant improvement in our economic results over
this fiscal year reflects the success of our profitability
improvement and cost control policies, both to be continued over
2015. Our management team reinforcement and recent developments and
acquisition advances have increased ESI solid assets to strengthen
strategic relationships with OEMs and their Tier 1 suppliers and
partners, and to amplify the use of our virtual prototyping
solutions in their eco-system. The increasing use of our solutions
by all stakeholders collaborating on the digital model via
proprietary Cloud computing technologies, and our presence in new
areas such as embedded systems and the life sciences, will
strengthen and expand ESI market positioning. ESI Group is fully
aware of how crucial sustaining competitive innovation is to
keeping our leadership position in helping our industrial clients
work towards e.g. smart digital factories. This explains why we
plan to maintain our investment momentum as well as our targeted
acquisition strategy in 2015, while pursuing growth and increasing
economic performance."
Consolidated annual resultsTo
January 31, 2015
€ millions FY’ 14 FY’ 13
Δ actual terms
FY’ 14
constantcurrency
Δ constantcurrency
€m % €m
%
Total sales 111.0 109.3 1.7
+1.6%
112.1 2.7 +2.5% Licenses 83.3 80.6 2.7 +3.3%
84.2 3.6 +4.4% Services 27.8 28.7 -1.0 -3.3% 27.9 -0.8 -2.9%
Gross margin 79.1 75.0 4.1 +5.4%
80.1
5.0 +6.7% % of sales 71.3% 68.6% 71.4%
EBITDA*
10.1 9.6 0.6 +5.8 %
10.8 1.3 +13.6% % of sales
9.1% 8.7% 9.7%
Current operating profit 9.0
7.9 1.1 +14.0%
9.7 1.8 +23.6% % of sales 8.1% 7.2%
8.7%
EBIT 8.4 6.2 2.2 +35.6%
9.1
2.9 +47.6% % of sales 7.5% 5.6% 8.1%
Attributable net
profit 5.5 2.4 3.0 +127.2%
5.9 3.5 +145.6%
en % du CA 5.0% 2.2%
5.3%
The financial statements were approved by the Board of Directors
on April 14, 2014. The audit procedures were performed on the
consolidated financial statements and the certification report is
being issued.
* Excluding acquisition costs, amortization of goodwill and
before the impacts of R&D's adopting IFRS.
Solid licensing activity and refocusing of Services
As announced on March 12, 2015, annual sales for 2014 came to
€111.0 million, up slightly by 1.6% on the previous year in actual
terms. There was a negative currency effect of €1.0 million
over the period, mainly due to the fall in value of the Japanese
Yen. Sales would have been €112.1 million, up 2.5% at constant
currency. Adoption of ESI Group's solutions by industry leaders and
their subcontractors reflects the success of the immersive virtual
reality offering and builds on the evident value proposition of
Virtual Prototyping to address societal priorities such as air
quality and renewable energies. This solid business dynamics, less
evident in the first three quarters, was apparent again with the
performance of the 4th quarter, during which sales grew by 7.8% in
actual terms, confirming the more pronounced seasonal nature of the
business in 2014.
Licensing activity was solid, representing 75.0% of 2014 sales,
compared with 73.3% in 2013. It grew 3.3% over the period, buoyed
by 4.8% growth in the installed base and a repeat business rate
which remained at the high level of 84.7%. New Business accounted
for 20.1% of Licensing sales. The growth of Licensing and New
Business was affected by the difficult political and economic
context in the BRIC countries, notably Russia and China.
The Services activity amounted to €27.8 million (down 3.3% in
actual terms) following the former strategic decision to focus on
projects with higher added value. After a reduction in activity in
the first nine months of the year there was a significant 10.7%
rise observed in the 4th quarter.
Improvement in gross margin
The Gross Margin was 71.3% of sales compared with 68.6% in 2013.
This improvement is due to the favorable development of the product
mix. The licensing margin was sustained at a high level and there
was significant improvement in the Services margin consequent to
the strategic refocusing of the business.
Sustained R&D investment policy and impact of the policy
to control operational costs
The ESI Group retained an active investment policy; manifest by
12.4% growth in its R&D expenses in actual terms. These
expenses amounted to €23.9 million (excluding the French research
tax credit), and represent 28.8% of Licensing sales; a slight
increase compared to 2013, when they were at 26.2%. These
investment expenses include development activity by the recent
external growth operations, such as virtual reality (IC.IDO), fluid
dynamics (OpenCFD) and systems (CyDesign technology). The total
R&D expenses recorded in the income statement in IFRS format
are €20.0 million in actual terms, up 16.9% on the previous
year.
Sales & Marketing and G&A costs remained largely stable
(€35.0 million and €15.2 million respectively) thanks to the
Group's efforts to control costs.
Improvement in profitability
In actual terms, EBITDA grew 5.8% to €10.1 million, i.e. a
margin of 9.1% compared with 8.7% in 2013. This growth improves to
13.6% when reported at constant rates (for an equivalent of €10.8
million, i.e. 9.7% margin).
Current Operating Profit (ROC) rose 14.0% to €9 million, showing
a margin of 8.1% up 0.9 point compared with last year. At constant
rates, it would be €9.7 million, up 23.3%, with a margin of
8.7%.
EBIT rose 35.6% to €8.4 million, corresponding to a margin of
7.5% and up 1.9 points compared with 2013. At constant rates, the
EBIT would be reported as €9.1 million, up 47.6%, i.e. €2.9
million.
The increasing difference in growth between the EBITDA and the
ROC on the one hand and the EBIT on the other hand is mainly due to
the exceptional items recorded in 2013; including provisions for
risks and acquisition costs.
Net Financial Income was €0.7 million vs. a loss of €0.9 million
in 2013. This €1.7 million change is due mainly to the impact of
the exchange rates evolution, particularly of the US dollar right
at the end of the year.
The attributable Net Profit was €5.5 million, i.e. 5.0% of net
margin, compared with €2.4 million in 2013, an increase of
127.2% in actual terms. The €3.6 million tax expense remained high
at an average rate of 39.5%, to be compared to 52.1% in 2013. This
improvement is mainly due to the recording of provision for tax
risk carried out in 2013.
A sound financial structure
Available cash at year-end was €11.9 million. Net debt was €10.7
million at January 31, 2015, compared with €14.0 million at January
31, 2014. Gearing (net debt in relation to equity) remained at
12.3% and continues to improve, confirming the soundness and low
debt of our financial structure.
At January 31, 2015, the ESI Group held 7.1% of its capital as
treasury shares.
Positive commercial dynamics for 2015
The quality of the business indicators in the first months of
2015, combined with recent strategic advances in marketing and
recent acquisitions, places ESI Group in an ideal position to
increase its business volume and achieve profitable growth this new
fiscal year.
The reinforcement of the management team with the arrival of
Peter Schmitt, PhD., as Executive Vice President of Sales &
Marketing, and the promotion of Mike Salari, as Executive Vice
President of Engineering Services, is expected to enhance our
ability to deploy global strategies and implement actions with
major industrial actors, including new clients.
The business dynamic will also be supported by the accelerated
growth of ESI Group in markets of the future, such as advanced
driver assistance systems (ADAS) vehicle safety and the
visualization of scientific Big Data. This diversification, into
areas with strong potential such as active security,
cyber-security, machine learning and life sciences, derive in part
from the acquisition of CIVITEC and the purchase of the assets of
Picviz Labs., both owners of leading edge technology solutions.
These technologies also have an established commercial base which
broadens diversification across industry sectors. Finally, they
play a role in reinforcing the innovative potential of ESI Group's
digital modeling and Virtual Prototyping solution. The Group
expects to draw on its solid experience in acquisitions to
successfully integrate these acquired top class companies.
For more ESI news, visit: www.esi-group.com
Next events:
Q1 2015 revenueJune 4, 2015
About ESI
ESI is a world-leading provider of Virtual Prototyping software
and services with a strong foundation in the physics of materials
and Virtual Manufacturing.
Founded over 40 years ago, ESI has developed a unique
proficiency in helping industrial manufacturers replace physical
prototypes by virtually replicating the fabrication, assembly and
testing of products in different environments. Virtual Prototyping
enables ESI’s clients to evaluate the performance of their product
and the consequences of its manufacturing history, under normal or
accidental conditions. By benefiting from this information early in
the process, enterprises know whether a product can be built, and
whether it will meet its performance and certification objectives,
before any physical prototype is built. To enable customer
innovation, ESI’s solutions integrate the latest technologies in
high performance computing and immersive Virtual Reality, allowing
companies to bring products to life before they even exist.
Today, ESI’s customer base spans nearly every industry sector.
The company employs about 1000 high-level specialists worldwide to
address the needs of customers in more than 40 countries.
ESI is listed in compartment C of NYSE Euronext Paris and is
granted “Entreprise Innovante” (Innovative Company) certification
since 2000 by Bpifrance. ESI is eligible for inclusion in FCPI
(venture capital trusts dedicated to innovation) and PEA PME.
2014 awards: winner of the 2014 ASMEP-ETI/Bpifrance award in the
Innovation and industrial strategy category and of the Grand Prix
des Entreprises de Croissance, in the Software and IT Services
category and winner of the “Ambitions d’Entrepreneurs” trophy in
the International category.
For further information, visit www.esi-group.com.
Investors RelationsESI Group -
EuropeSylvie Delangle+33 1 53 65 14
14investors@esi-group.comorESI Group –
AmericaCorinne Romefort-Régnier+1 415 994
3570investors@esi-group.comorNewCapEmmanuel
HuynhLouis-Victor Delouvrier+33 1 44 71 98
53esi@newcap.fr
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