Continued growth and significant improvement
in profitability
- Significant improvement in current
operating profit
- Further investment efforts and
integration of acquisitions
- Realization of the strategic
vision
Regulatory News:
ESI Group (Paris:ESI):
Alain de Rouvray, Chairman and Chief Executive Officer of ESI
Group, comments: “The dynamics in the adoption of ESI Group's
Virtual Prototyping solutions by industrial leaders was fully
confirmed in 2015. This trend was amplified by the rise of the
smart digital factory that is revolutionizing the innovation
process and shortening delays in product manufacturing. The buoyant
development of high value-added innovative engineering studies
confirms ESI’s global role as a major player in this
transformation. Our acquisition policy, in essential technological
domains, has allowed us to expand the Group’s strategic positioning
in the full manufacturing and performance value chain of industrial
products. In 2015, our profitability significantly increased
despite the costs of acquisitions integration. Moreover our
integral virtual prototyping offer is now considerably enriched
thanks to multi-physics inputs such as systems modeling that
animates 3D components, continuous connection to the real world
through the Internet of Things (IoT), and integrated machine
learning leading to autonomous driving. In the near term, combining
sales growth and the deployment of these exciting and expected
synergies from our newly-acquired solutions, we anticipate a
further improvement in our economic performance while strengthening
our strategic partnerships.”
Consolidated annual results
Financial year ending January 31
In € millions
FY 15
FY 14
Δ actual terms
Currencyeffects
Δ constantcurrency
Total sales
124.7 111.0
+12.3% 6.1 +6.8% Licenses 97.0 84.5
+14.8% 4.8 +9.1% Services 27.7 26.5 +4.5% 1.3 -0.5%
Gross
margin 90.4 79.1
+14.3% 4.7 +8.3% % of sales
72.5% 71.3%
EBITDA* 14.3 10.8
+32.2%
0.6 +26.2% % of sales 11.4% 9.7%
Current operating
profit 11.8 9.0
+31.8% 0.6 +25.6% % of
sales 9.5% 8.1%
EBIT 9.4 8.4
+12.0% 0.5
+5.4% % of sales 7.5% 7.5%
Attributable net profit
5.3 5.5
-3.0% 0.4 -10.7% % of sales
4.3% 5.0%
(*) EBITDA excludes the non-recurring result and now includes
the impact of R&D capitalization and provisions/reversals for
impairment of trade receivables. 2014 amount is restated after
change in definition of EBITDA. See annexed the reconciliation
table.
Acquisitions during the period: CIVITEC's company entered the
scope of consolidation as of March 27, 2015 and the assets of
Ciespace were consolidated as of April 10, 2015. The assets of
PicViz were consolidated as of March 30, 2015, and PRESTO software
entered the scope of consolidation as of May 6, 2015. ITI GmbH's
company was consolidated as of January 6, 2016. These acquisitions
represent revenue of €0.7 million over the full year and €0.5
million in the fourth 2015 fiscal quarter. Mineset, acquired on
February 5, 2016, will be consolidated in the 2016 financial
year.
Substantial growth in Licensing activity and engineering
studies
As announced on March 14, 2016, 2015 annual sales totaled €124.7
million, up +12.3% on the previous year at actual rates.
Acquisition-related revenue remained limited at €0.7 million, split
equally between Licensing and Services. There was a positive
currency effect of €6.1 million, arising mainly from the positive
trend of the US dollar and, to a lesser extent, the Japanese yen
and South Korean won.
The product mix shifted towards Licensing activity, which now
accounts for 77.8% of total sales compared with 76.1% in 2014.
Sales generated by Licensing activity strongly increased by
+14.8% at actual rates compared with the previous year. That solid
growth reflects ESI Group's success in developing its installed
base, which generates the high repeat business rate of 90% at
constant exchange rates. Services activity recorded a moderate
growth of +4.5%, driven by a solid +14.8% increase in engineering
studies, the core of ESI Group's Consulting activity (Services
excluding Other Services, such as supply of equipment).
In 2015, the geographical split in sales reflected the dynamism
of activity in Asia, while the proportion of activity recorded in
BRIC countries remained stable.
Improvement in the gross margin
The gross margin was 72.5% of sales, compared with 71.3% in
2014. This improvement was a result of the shift in the product mix
towards Licenses and also an improvement in margin in both
Licensing and Consulting activities.
Operating costs under control, further investment
efforts
In 2015, Sales and Marketing (S&M) and General and
Administrative (G&A) costs represented 31.0% and 13.8% of
global sales respectively. Altogether, these costs increased by
+11.2% in 2015, compared with a +12.3% increase in sales. This
result, which fully includes S&M and G&A expenses of the
Group’s acquisitions, highlights ESI’s good piloting of its
operating costs over the year.
In alignment with our strategy based on technological
innovation, R&D investments increased by +21.6% at actual
rates. R&D costs thus totaled €29.1 million (excluding the
French Research Tax Credit ‘CIR’) and now represent 30.0% of
Licensing sales. This increased investment concerns existing
technologies and also technologies associated with recent external
growth operations. Once CIR and R&D capitalization costs are
taken into account, the total R&D costs recorded in the P&L
statement amounted to €22.8 million at actual rates, an increase of
+14.0%.
Strong growth in EBITDA and Current Operating Profit
The EBITDA increased sharply (+32.2%) to €14.3 million, giving
an EBITDA margin of 11.4% in 2015 compared with 9.7% in 2014. The
annexed reconciliation table documents the effect of the
standardization in the definition of EBITDA and confirms the
Group’s good performance in terms of increase in profitability both
prior to and after the integration of its acquisitions.
Current Operating Profit strongly grew by +31.8% to €11.8
million, showing a current operating margin of 9.5%, or 1.4
percentage point on the previous year.
EBIT increased by +12.0 % to €9.4 million, giving a margin of
7.5%, stable on the previous year. This increase was smaller than
the increase in EBITDA and current operating profit mainly because
of exceptional costs, classified in non-recurring costs, associated
with the last six technological acquisitions carried out in
2015.
The Financial Result was -€0.9 million versus +€0.7 million in
2014. In 2015, financial costs, notably associated with interest
charges, were not totally offset by revenue from currency gains and
losses, which in 2014 exceptionally totaled €1.6 million following
the strengthening of the US dollar at the end of the year.
Attributable Net Profit totaled €5.3 million in 2015, to yield a
net margin of 4.3%. This takes into account a tax burden of €3.2
million.
Solid financial structure
Available cash at the end of 2015 was €10.3 million euros. Net
debt was €36.4 million at January 31, 2016 compared with €10.7
million at January 31, 2015. The gearing (debt-to-equity ratio) was
39.4% following the acquisitions carried out during the year.
At January 31, 2016, ESI Group held 7.2% of its capital in
treasury stocks.
Further adoption by major customers
The deployment of ESI Group’s solutions among global industrial
leaders and their subcontractors has been characterized by the
amplification of the Company’s successes, notably among major
automotive manufacturers and in particular among our traditional
and emblematic strategic partners such as Volkswagen Group,
Renault-Nissan and Honda. Our sectorial diversification strategy
has also continued, and has been intensified in the aerospace,
energy and heavy industry sectors. Regarding the product offer, the
virtual reality solution has performed particularly well through
the strengthening of existing collaborations or through new
cooperations with industrial leaders in the aerospace and
transportation sectors, including Boeing, Bombardier and Sikorsky
Aircraft Corporation.
Realization of the strategic vision
The expansion of the Group’s strategic positioning, notably
thanks to the newly acquired technological building blocks, has
further enhanced our growth potential. In particular, the
acquisition of ITI GmbH in January 2016 has given the Group a
recognized presence in the simulation of 0D-1D systems. The
latter’s expertise, which is acknowledged by major global
companies, allows direct access to an industrial product functional
features and to represent its interactions with its 3D components.
Most importantly, the use of the information technologies of the
future (ICT) that address Big Data, Machine Learning and the
Internet of Things (IoT) now allow to present and experience ESI’s
solutions in an interactive space and to enable real-time
decision-making in a virtual immersive environment. The innovative
virtual prototype can now become agile and smart to support
industrial manufacturers in their transformation towards the era of
factories of the future and of autonomous digital products.
Reconciliation table following the standardization in the
definition of EBITDA
FY15 FY14 Δ actual terms
% amount
Turnover
124.7 111.0 12.3% 13.7
EBITDA - former definition 11.7 10,1 15.3% 1.5
of which organic 13.6 10,1 34.5% 3.5 of which 2015 M&A -1.9 0,0
-1.9 R&D capitalization - net effect 3.5 1.2 2.3 Net
provisions for accounts receivable depreciation -0.8 -0.4 -0.4
EBITDA - new definition 14.3 10.8 32.2%
3.5 of which organic 14.8 10.8 37.2% 4.0 of which 2015 M&A -0.5
0.0 -0.5 Amortization on other tangible and intangible
assets -2.2 -2.1 -0.1 Other net provisions
-0.2 0.3
0.5
Current Operating Profit
11.8 9.0
31.8% 2.9
You can find all of our press releases at:
www.esi-group.com/company/press/news-releases
Next events:
2016 First quarter revenue:
May 26, 2016
Needham Emerging
TechnologyConference:May 18-19, 2016 – New York (US)
Midcap Partners Forum:
June 3, 2016 - Paris
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 more than 1,000 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.
For further information, go to www.esi-group.com.
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Investor RelationsESI Group – Europe/AsiaCorentine
Lemarchand, +33 1 53 65 14 51orESI Group – AmericaCorinne
Romefort-Régnier, + 1 415 994
3570orNewCapEmmanuel HuynhLouis-Victor
Delouvrier+33 1 44 71 98 53
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