(*) EBITDA excludes non-recurring items and includes the impacts of capitalized R&D expenditure and provisions/reversals for impairment of trade receivables.
Acquisition during the period: “Scilab Enterprises” was consolidated from February 28, 2017.
NB: because of strong seasonal variations, ESI Group's Licenses business recognizes a big part of its annual revenue in the 4th quarter of the year. The Group’s financial year ends on January 31.
First-half 2017 sales
First-half 2017 sales came in at €53.7
million, down 4.0%. Sales driven by the change of perimeter amounted to
€0.3 million, and correspond to the acquisition of Scilab Enterprises in
February 2017. There was a mild positive currency effect of €0.2 million
for the period, the favorable effect from the US dollar and Korean won
partially offset by the negative impact of movements in sterling and the
Japanese yen.
This decrease reflects both the base effect following the exceptional performance in H1 2016, and the impact of the transformation phase on both existing and new business.
The product mix remained stable year-on-year, Licenses contributed 73% of total sales, compared with 72% in the prior period.
Licenses revenue declined by 2.8% year-on-year to €39.0 million. Most of this decline concerned the sale of perpetual licenses (PUL) in H1 2016 and does not reflect a recurring issue in the install base.
Services revenue was down by 6.9% to €14.7 million. It should be recalled that Services grew by 15.4% in H1 2016 due to a cyclical and exceptional performance of Japan.
ESI’s geographic sales mix reflects a relative performance of global activity on the semester, better in Europe (up 2.8%) than in the Americas (down 2.4%) and Asia (down 10.3%).
Gross margin
Gross margin came in at 67.3%, compared to
69.8% in H1 2016. This lower figure was mainly due to an unfavorable
product mix within the Services activity.
Continued strategic investment in R&D
In accordance with
the Group’s strategy of investing in cutting-edge technology, R&D
investment has been pursued at a high level. R&D expenditure rose 9.0%
to €16.9 million (excluding the French Research Tax Credit ‘CIR’),
reflecting ESI’s constant focus on the emerging technologies that
underpin its disruptive PPL approach. These investments represent 43.4%
of Licensing revenue (amplified by the strong seasonality effect).
However, once the Research Tax Credit and capitalized R&D expenditure
are taken into account, total R&D costs recorded in the P&L amounted to
€13.5 million, an increase of 3.4%.
Profitability indicators impacted by investment
EBITDA was a
negative €3.9 million, compared to a negative €0.3 million in H1 2016.
This decline reflects a continuation of the R&D investments and a 3.1%
increase in Sales & Marketing (S&M) costs which represent on the
semester 36.3% of total sales. General and Administrative (G&A) costs
dropped by 3.5% year-on-year and represented 16.1% of total sales.
As a result of the decline in EBITDA, the Group reported a current operating loss of €5.5 million and negative EBIT of €6.0 million, down by €3.6 million and €3.2 million, respectively, on H1 2016. The Financial Result remained stable year-on-year at negative €1.6 million and the Group’s attributable let loss for the period was €5.9 million, compared to a loss of €3.5 million for prior period.
It should be recalled that these financial results reflect traditionally the strong seasonality of Licensing revenue, lower on the first semester.
A robust financial structure
The Group had a cash balance of
€14.8 million at the reporting date showing a cash generation of €8.7
million. Net debt stood at €28.6 million at July 31, 2017. The gearing
(debt-to-equity) ratio was 30.4%.
Strategic transformation to deliver solutions for the Industry of the Future
Integration of new technologies as part of ESI’s PPL approach
By
harnessing the PPL approach, ESI takes a giant step along the road to
becoming a pioneer in helping businesses transition to the Smart Factory
and Industry of the Future. The new solutions aim to provide businesses
with complete control over an “as new” product's entire lifecycle –
beyond the virtual development and pre-certification phase which is well
covered by Virtual Prototyping. They also aim to take into account the
product’s lifecycle “as used” and its potential damage, in a
representative “in service” ecosystem. This disruptive approach makes it
possible to develop a Hybrid TwinTM of the Cloud connected
product (IoT), that will anticipate, follow and pilot its operational
performance, and plan its maintenance – from product commissioning to
operational withdrawal – a crucial element in the transition to the
Industry of the Future.
Strengthening our ecosystem
In order to promote this strong
leading-edge strategy, ESI has adapted its scientific resources and
strengthened its Scientific Committee – made up of internationally
renowned internal and external experts – and its scientific executive
management. This continuous strengthening has provided the Group with
access to European and global special new projects, in co-creation with
industrial strategic partners, who act as pioneers and validate the
technologies that the Group has acquired. It also provides opportunity
to strengthen the ties and synergies with the academic world.
