* Excluding acquisition costs, goodwill and the impact of R&D IFRS capitalisation
Good business dynamic
As announced on March 13, 2014, 2013 annual sales totalled 109.3 million euros, stable in actual terms and up 6.6% at constant currency. The currency effect, essentially a result of the negative evolution of the euro/yen parity, had an impact of -7.0 million euros on annual revenues. The underlying and encouraging sales dynamic, notably penalised by a negative base effect, was driven by the buoyant growth of +12.8% recorded during the 4th quarter of 2013 at constant currency (+7.3% in actual terms). This reflects the development of our industrial partnerships embodied by the signing of multi-year contracts with major strategic clients.
At constant currency, the following key indicators confirm the sales performances and the solidity of our Licenses activity:
- Increase in Licenses sales: +11.1%
- Buoyant increase in the Licenses installed base: +13.3%
- Sustained and high rate of Licenses repeat business: 86.7%
- Dynamic growth in New Business: +6.0%
The decrease in Services activity to sales totalling 28.7 million euros (-4.4% at constant currency), reflects a consolidation in activity following the buoyant growth recorded the previous year (+24.1% in actual terms) and the Group’s policy of gradually pulling out of non-strategic activities outside its core business. Nevertheless, the growth recorded over the last three years (+7.4% on average at constant currency) reflects solid demand amongst industrial companies that use our solutions, in particular through innovative co-creation projects.
Increase in the gross margin at constant currency
At constant currency, the gross margin represented 69.3% of revenue (68.6% in actual terms), compared with 68.1% in 2012. This improvement is a result of the favourable evolution of the product mix (74.1% of Licenses, versus 71.1% in 2012), combined with an increase in the Licenses margin, that confirms the solidity of the Licenses business model. The margin for Services was down because of the negative base effect compared with 2012. However, the Services gross margin should improve again in 2014, following the refocusing of our activities undertaken in 2013.
Operating costs under control
ESI Group has continued to pursue an active investment policy by maintaining a +6.0% increase at constant currency (+3.2% in actual terms) in its R&D expenditure. The latter totalled 21.1 million euros in real terms (excluding Research Tax Credit), or a stable figure of 26.2% as a proportion of Licenses sales. In IFRS terms, R&D costs on the income statement totalled 17.0 million euros in actual terms, an increase of +9.1% due to a lower capitalisation of R&D costs over the period.
Sales and Marketing costs came to 34.9 million euros, or 32.0% of total revenue compared with 32.6% the previous year. Following the significant increase recorded in 2012, this shows good control of these costs.
General & Administrative costs totalled 15.2 million euros in real terms, compared with 14.3 million euros in 2012. This increase (+6.7% in actual terms, +9.1% at constant currency) can be explained by the incorporation of restructuring costs and by targeted investments, including implementation of new management tools.
Substantial improvement in EBITDA and operating profitability at constant currency
In actual terms, EBITDA was up +8.5% to 9.6 million euros, giving a margin of 8.7% in 2013 compared with 8.1% in 2012. When reported at constant currency, the increase was even greater: +44.7% for an equivalent of 12.7 million euros, or a margin of 11.0%. These margins confirm the improvement in profitability that was visible over the second half of the year.
Personnel costs were notably controlled as the average workforce reduced from 1,040 FTE over the 1st half of 2013 to 1,011 FTE over the 2nd half of 2013. At the end of the year (January 31, 2014), the workforce stood at 1,008 employees, down from at 1,045 a year earlier.
At constant currency, core operating profit increased by +25.3% to 11.0 million euros, giving a margin that was up +1.4 percentage points (9.5% in 2013 vs. 8.1% in 2012). In actual terms, core operating profit totalled 7.9 million euros, down 10.8%, with a margin of 7.2%. Given the EBITDA figure, this smaller change was notably due to a lower capitalisation of R&D costs in IFRS terms and to higher provisions.
At constant currency, EBIT increased by +16.1% to 9.3 million euros,
giving a margin of 8.0%, up 0.6 percentage points compared with 2012. In
actual terms, EBIT totalled 6.2 million euros, down 1.9 million euros.
This change reflects the incorporation of non-recurrent costs associated