ANALYST CONFERENCE Paris, October 30, 2015

Transcription

1 ANALYST CONFERENCE Paris, October 30, 2015 André Harari, Chairman of the Board of Directors Daniel Harari, Chief Executive Officer Jérôme Viala, Chief Financial Officer

2 Financial Results for Q Financial Results for 9M Outlook Unless stated otherwise, comparisons are at actual exchange rates. When mentioned, like-for-like comparisons between 2015 and 2014 correspond to 2015 figures restated at 2014 exchange rates. 2

3 Q3 2015: Orders Down 3% at Actual Exchange Rates and 9% Like-for-Like Orders for New Systems (in millions of euros) % Q Q Orders for new systems only totaled 22.9 million A decrease of 0.8 million compared with Q New software licenses: 5.4 million (-5%) CAD/CAM equipment: 13.5 million (-8%) Training and consulting: 3.4 million (+28%) Strong performance in Fashion and apparel as well as Furniture Strong decline in China and Automotive Fashion and apparel: +10% (+3% like-for-like) Furniture: +58% (+42% like-for-like) China: -44% (-53% like-for-like) Weight in total orders: 9% (vs. 15% in Q3 2014) Automotive: -29% (-33% like-for-like) Weight in total orders: 28% (vs. 39% in Q3 2014) 3

4 Q3 2015: A More Difficult than Expected Macroeconomic Context The macroeconomic context has continued to deteriorate, mainly due to the Chinese economy s confirmed slowdown The continued decline of euro against the yuan since the summer of 2014 significantly contributed to the Chinese economy s slowdown Chinese companies production costs are increasingly less attractive, especially for euro zone companies that had outsourced their production or made their purchases in China In order to partially compensate for Chinese exporting companies loss of competitiveness, the Chinese government depreciated its currency by 3% against the dollar in August, lowering the dollar/yuan parity to end of 2011 levels Following a rapid rise in stock prices, the Chinese stock market crashed by 30% ("Black Monday"), causing panic in China and general concern worldwide This slowdown has had repercussions on all Asian countries, which are very dependent upon China, as well as on raw material-exporting countries Other emerging markets have seen their exchange rates fall and their economies strongly impacted against the backdrop of local geopolitical turbulence Brazil: political crisis, a 3% decrease in GDP predicted for 2015 (IMF), the real declining 45% against the dollar and 36% against the euro, since January 1 Turkey: political crisis, the Turkish pound falling 24% against the dollar and 16% against the euro Conflicts in the Middle East Customers within Lectra s market sectors have consequently decreased their investment levels due to a lack of visibility and increasing concerns 4

5 Q3 2015: Revenues and Income from Operations Up Sharply In millions of euros Q Actual Q At 2014 exchange rates Q Actual Change at actual exchange rates Change like-for-like M % M % Revenues % % New systems % stable stable Recurring revenues % % Gross profit in % of revenues % % % % +1.1 points % +0.2 points Income from operations in % of revenues % % % % +2.8 points % +0.7 points Net income 7.0 na % na na Free cash flow 10.8 na % na na $/ exchange rate Income from operations rose 33% despite the 2.3 million increase in fixed overhead costs related primarily to the transformation plan Q3 income from operations is boosted each year by the natural drop in overhead costs over the summer vacation months Free cash flow includes the receipt of 4.8 million relating to the 2011 non-deducted French research tax credit 5

6 Financial Results for Q Financial Results for 9M Outlook Unless stated otherwise, comparisons are at actual exchange rates. When mentioned, like-for-like comparisons between 2015 and 2014 correspond to 2015 figures restated at 2014 exchange rates. 6

7 9M 2015: Orders Increased by 4% at Actual Exchange Rates but Fell by 4% Like-for-Like Orders (in millions of euros) M 2015 Actual In millions of euros Figures at actual exchange rates. 9M 2014 Actual Q1 Q2 Q3 Q M 2013 Actual Change 9M 2015 / 9M 2014 At actual exchange rates Change 9M 2015 / 9M 2014 Like-for-like Total % -4% Of which New software licenses % -2% CAD/CAM equipment % -4% Training and consulting % -9% 7

8 Strong Rebound in North America, Drop in Asia-Pacific Change 9M 2015 vs. 9M 2014 at actual exchange rates. Highly contrasted situation 1 Europe (38% of total orders): -3% Asia-Pacific (28%): -6% Of which China (13%): -8% Americas (27%): +33% North America (21%): + 44% South America (6%): +5% Other countries (7%): +5% 58% 9M % 51% 9M % An increase in orders, driven by Fashion and apparel, and Furniture Fashion and apparel (53% of total vs. 52%): +5% Europe: -11% North America: +60%; South America: +32% Asia-Pacific: +9% Automotive (30% vs. 36%): -13% Europe: +3% North America: +1%; South America: -77% Asia-Pacific: -24% Furniture (12% vs. 4%): +210% Other industries (5%): -33% Emerging countries 1 Like-for-like: Asia-Pacific -21%; North America +22%; South America stable. Developed countries The share of emerging countries increased Emerging countries: +19% 2 Developed countries: -11% 2 Like-for-like: China -23%; Brazil -28%; Mexico +109%; Eastern Europe +33%... Orders for new software licenses, CAD/CAM equipment, and training and consulting. 8

9 9M 2015: Very Strong Earnings Growth In millions of euros 9M 2015 Actual 9M 2015 At 2014 exchange rates 9M 2014 Actual Change at actual exchange rates Change like-for-like M % M % Revenues % +8,6 +6% New systems % +3,2 +5% Recurring revenues % +5,4 +6% Gross profit in % of revenues % % % % +2.0 points +7,6 +7% +0.8 points Income from operations in % of revenues % % % % +4.5 points +2,7 +20% +1.2 points Net income 16.0 na % na na Free cash flow 14.8 na % na na $/ exchange rate The roadmap corresponding to the company s minimum objective communicated on February 11, 2015 anticipated revenues of million and income from operations of 20.4 million for the first nine months At actual exchange rates, revenues were almost in line with the roadmap, income from operations is ahead by 2.6 million The increase in gross profit represents 90% compared to that of revenues 9

10 Growth in Revenues from New Systems Sales and in Recurring Revenues In millions of euros Increase in total revenues million (+14%) M M 2015 Recurring revenues +15% +14% New systems sales Revenues from new systems sales: +15% New software licenses: 17.8 million (+12%) CAD/CAM equipment: 44.9 million (+16%) Training and consulting: 9.1 million (+18%) Revenues from recurring contracts: +13% Software maintenance and online service contracts ( 34.3 million): +12% Hardware maintenance and online service contracts for CAD/CAM equipment ( 25.1 million): +14% Revenues from consumables & spare parts: +15% 42.9 million (24% of total revenues) Order backlog: 16.9 million at September 30, million vs. December 31, 2014 Of which 9.5 million of orders for new software licenses and CAD/CAM equipment for shipment in Q and 5.9 million for training and consulting to be delivered as projects are carried out Figures and change at actual exchange rates. 10

11 Complex Effects Due to Strong Exchange Rate Fluctuations Lectra has significantly bolstered its competitive position worldwide Lectra has opted to maintain its R&D and manufacturing in France, while investing in innovation to enhance its competitiveness. Most of Lectra s production costs are thus euro-denominated, with practically zero inflation. Conversely, most of its competitors especially the main one, a US company manufacture their equipment in China. Their operating costs, essentially yuan-denominated, are subject not only to continuously rising wages and social charges, but also to higher inflation. Sale prices in North America and Asia are mainly expressed in US dollars, or in yuan in China The few European vendors specialized in CAM equipment that have maintained their production in Europe have cut their sale prices in Asia and in Americas in order to expand their market shares Lectra customers competitive situations have altered radically, either improving or deteriorating, depending on the location of their production and sales Those European companies that have outsourced their production or made their purchases in China must adjust to rising import costs by revising their supply strategy Chinese manufacturers, less competitive than before, are experiencing a decline in orders from European customers, resulting in overcapacity, which in turn has negatively impacted their investment decisions The same applies to companies in emerging countries that have witnessed a strong depreciation of local currency against the dollar (the first of which was Brazil), which has significantly increased their investment costs Given the complex effects produced by such sharp fluctuations in currency parities, like-forlike comparisons become decreasingly relevant 11

12 China Remains One of Lectra s Growth Accelerators Lectra s business in China has been strongly impacted since the beginning of this year, following very strong growth that began in 2009 and which reached a historic peak in 2014 Orders for new systems have fallen, following increases of 45% and 39% for the years 2014 and 2013, respectively This short-term situation may continue for several quarters Since the beginning of the transformation plan, Lectra China s team has been significantly strengthened Lectra s strategy enables Chinese companies to meet the objectives established in the "Made in China 2025" government plan, which was launched at the end of July, to level Chinese industry If China wants to avoid being overtaken by manufacturers in emerging countries that have lower costs, several challenges must be rapidly overcome, specifically it must better cooperate and compete with industrialized economies Chinese manufacturers represent very unequal levels of efficiency and quality Change at actual exchange rates. 12

13 The "Made in China 2025" Plan Introduced by the Chinese Government Large Volume Manufacturer Manufacturing Power Innovation Leader Road-map Key Highlights Convergence of Computerization & Industrialization Smart Manufacturing Core Elements Innovation-driven, Smart Manufacturing transformation Digital, Inter-connected, Intelligent 5 Big Projects Smart Manufacturing Innovation Center Smart Manufacturing Strengthen Industry base Green Development High-End machinery KPIs National: $3 trillion GDP incremental over 20 years Companies: 20% increase in efficiency, 20% costs down, exhaust emissions reduced by 10% Lectra s offer and strategy enable its Chinese customers to meet the plan s challenges 13

14 Acceleration in Marketing Investments Click to see online content Customer stories Brochures, White papers, Press releases Videos 14

15 A Digital Strategy Tailored to China Lectra.cn, a website that incorporates the best practices made for B2C 15

16 The Increase in Recurring Revenues Finances the Increase in Costs Related to the Transformation Plan In millions of euros, at actual exchange rates Positive impact of currency fluctuations Increase in recurring revenues Increase in revenues from new systems sales +1.2 Improvement in gross profit margins Income from operations 9M 2015 Income from operations 9M 2014 (2.4) (3.3) Increase in investments for the future related to the company s transformation plan Natural increase in fixed overhead costs 16

17 Acceleration of R&D Investments In millions of euros R&D investments M 2015 R&D costs increased by 5% to 16.5 million and represented 9.4% of revenues ( 15.7 million and 10.2% in 9M 2014) Net R&D costs 1 : 10.2 million ( 9.4 million in 9M 2014) 260 engineers (18% of workforce) dedicated to R&D 97.0 million invested over the last 5 years Net R&D investments 1 : 61.5 million e R&D is not reported on the balance sheet: R&D spending is fully expensed and included in the overhead costs for the fiscal year 1 After deducting the research tax credit and the corresponding portion of the competitiveness and employment tax credit applicable in France and grants accounted for in the period. 17

18 Free Cash Flow Continues to Reflect the Pertinence of Lectra s 30,0 Business Model 30,0 In millions of euros 15,2 15,2 15, ,9 5,9 5, ,3 9,3 9, ,5 15,6 9,7 9, ,7 20,7 16,0 16, ,0 16, ,0 16,0 1,2 1, ,2 15,6 5,5 14, ,8 14,8 15,2 9M 2015 free cash flow: 14.8 million Cash flow provided by operating activities: 19.6 million (including a 2.3 million increase in the working capital requirement) Increase in working capital requirement: 2.3 million 20,7 19,5 19,5 5,5 17,3 17,3 5,8 5,8 15,2 Excluding the impact of the non-received 2015 research tax credit and competitiveness and employment tax credit, and the 2011 research tax credit reimbursement, 5,813,6 13,6 the increase in working capital requirement would have been limited to 1 million 13,6 Capital expenditures: 5.2 million 4.8 million received in Q3 corresponding to the non-deducted 2011 research tax credit The research 11,5 tax 11,5 credit ( 5.4 million) and the competitiveness and employment tax credit ( 0.6 million) for the first nine months of 2015 were accounted for but not received 11,5 9M M 2015 If they had been received, free cash flow would have been 16 million, excluding the 2011 research tax credit reimbursement CFL Free cash flow CFLCIR CFLCIR Difference CIRCF2 between CIRCF2 the Résultat Net Résultat Résultat Net Net2 Résultat Net2 amount of tax credits Net Résu income ltat Cumulated free cash flow since January 1, 2013: recognized Net and received Résu ltat Net2 17, million 40.3 million before non-recurring items 18

19 A Zero-Debt Company, Shareholders Equity and Net Cash Position Further Reinforced At September 30, 2015 In millions of euros, at December 31, except 2015 (at September 30) Shareholders equity: million 94.3 million at December 31, 2014 Net cash: 52.0 million 43.1 million at December 31, 2014 The company has no financial debt After payment of the dividend of 7.6 million ( 0.25 per share) declared in respect of FY Shareholders' equity Cash & Cash equivalents Net cash 19

20 A Structurally Negative Working Capital Requirement, a Key Feature of Lectra s Business Model In millions of euros, at December 31, except 2015 (at September 30) Working capital requirement was negative at 0.5 million This includes the receivable of 22.8 million on the French tax administration (Trésor public) corresponding to the research tax credit recognized since FY 2012, which have not yet been received or offset against income tax Restated for this receivable, the working capital requirement was negative at 23.3 million Working Capital Requirement Working Capital Requirement after restatement of the research tax credit and competitiveness and employment tax credit receivable 20

21 Following an Increase of 81% Since October 1, 2014, Lectra s Share Price Fell 26% since its Peak on July , , ,0 Evolution from January 1, 2014 to October 28, 2015 (in euros, daily closing price and index) Lectra: +30% CAC Mid & Small: +26% Share price October 28, 2015: M 2015 High (July 30): Low (January 6): 8.98 Volume traded 1 in 9M 2015 Shares: 7.1 million (+50%) Capital: 85.1 million (+125%) 8.0 8, , Ownership 2 André Harari and Daniel Harari: 36.1% Free float: 63.9% Delta Lloyd (Netherlands): >5% and <10% Schroder Investment Management (United Kingdom): >5% and <10% No other shareholder above 5% Since January 1, 2015, the number of shares has increased by 436,444 4 (+1.4%) due to the exercise of options Market Capitalization 2 : 332 million Enterprise Value: 280 million 1.2 x LTM Revenues x LTM EBIT 3 LTM PER 3 : 16.1x 1 According to Euronext statistics. These figures do not include trading on any other trading platform. 2 At October 28, LTM: last 4 quarters. 4 At September 30,

22 Financial Results for Q Financial Results for 9M Outlook 22

23 2015 Outlook The company indicated in its July 30, 2015 financial report That the shortfall in orders for new systems in the first half compared to expectations would not enable the company to meet the objectives it had set 1 That it should however achieve the corresponding figures at actual exchange rates, based on the forecast parities used for the second half of the year 2 Given Q3 financial results and business activity expected for the remaining part of the year 3 Revenues should be slightly below the figure communicated on July 30, between 235 and 238 million, and income from operations above, between 30 and 32 million Visibility remains limited and caution must be maintained More than ever before, the whole company is focused on accelerating the growth of its sales activity 1 Exchange rates at December 15, 2014, notably $1.25/ 1. 2 Notably $1,10 / 1. 3 Based on the forecast parities used for Q4, notably $1.11/ 1. 23

24 Confidence in Growth Prospects for the Medium Term Bolstered by the strength of its business model, even more robust operating fundamentals, a further reinforced balance sheet, and the relevance of its strategic roadmap, the company remains confident in its growth prospects for the medium term The third progress report on the transformation plan and investments for the future program as well as the 2016 objectives will be published on February 11,

25 Upcoming Financial Calendar FY 2015 Financial Results February 11, 2016 Analyst Conference February 12, 2016 lectra.com 25