- Dynamic Licensing activity in Q4 2013: +20.3% at constant currency
- Substantial negative currency effect
- Further geographical diversification: dynamism of BRIC countries
- Amplification of strategic partnerships
- Broadening of the sales offer thanks to recent acquisitons
4th quarter sales
Sales for the 4th quarter of 2013 totalled €45.5 million, an increase of +12.8% at constant currency (+7.3% in actual terms) on the 4th quarter of 2012, as a result of the buoyant sales of Licenses, for which there is a return to a stronger level following growth of just 2.3% over the same period of the previous year.
The seasonal nature of ESI Group's activity was reaffirmed over the period, with the 4th quarter of 2013 accounting for 41.6% of total annual sales (vs. 38.9% a year earlier).
The scope during the 4th quarter of 2013 was comparable to that of the 4th quarter of 2012, as CyDesign's technology is currently being integrated and has not yet generated revenue. The growth recorded in the 4th quarter can thus be analysed on an organic basis.
Over the period, License sales totalled €38.0 million and thus recorded buoyant growth of 20.3% at constant currency (+14.6% in actual terms), driven by the deployment of ESI's solutions amongst leading industrial partners. The installed base grew by +21.7% at constant rate (+15.7% in actual terms); the rate of repeat business increased to the particularly high figure of 95.3% at constant rate (90.4% in actual terms); and furthermore, New Business totalled €7.8 million, up +15.8% (+13.3% in actual terms), and accounted for 17.9% of Licenses sales.
Licensing activity thus accounted for close to 84% of total sales during the final quarter of 2013, compared with 78.3% a year earlier.
Over the last three years, 4th quarter Licensing activity has recorded average growth of +11.0% at constant currency (+8.3% in actual terms).
Services activity recorded sales of €7.5 million in actual terms over the quarter, a decrease of €1.7 million. This reduction was the result of a negative base effect due to exceptional projects having been recorded over the final quarter of 2012 (a strong quarterly growth of +20.7% was recorded in the same period of 2012), the decrease in non-strategic activities and a negative currency effect of €0.4 million.
Over the last three years, average 4th quarter Services activity has been stable (+1.7% at constant currency and -1.1% in actual terms).
2013 annual sales
Buoyant sales growth at constant currency, driven by Licensing activity
2013 annual sales totalled €109.3 million, up 6.6% at constant currency and stable in actual terms. The currency effect, essentially a result of the negative evolution of the euro/yen parity, had a impact of -€7.0 million (-6.4%) on 2013 sales.
This performance should also be analysed within the context of the buoyant growth recorded the previous year (+12.6% at constant currency, +15.7% in actual terms). Indeed, since 2011, annual sales have increased by an average of +9.6% a year at constant currency (+7.7% in actual terms).
The product mix moved towards Licensing activity, which now accounts for 73.7% of total annual sales compared with 71.1% in 2012.
Adjusted for the scope effect, organic sales growth was +5.9% at constant currency, and also confirms this dynamism.
Licenses: solid business model
Following the substantial growth recorded the previous year (+9.6% at constant currency, +12.6% in actual terms), Licensing activity totalled €80.6 million and was up a further +11.1% at constant currency (+4.0% in actual terms) on the previous year. Over the last three years, the average annual increase in Licensing activity was thus +10.4% at constant currency (+8.2% in actual terms), confirming the long-term nature of the demand for ESI Group solutions.
Still at constant currency, the installed base increased by +13.3% (+5.0% in actual terms) with the repeat business rate climbing to 86.7% (80.1% in actual terms). Also increasing, New Business totalled €17.5 million, up +6.0% at constant currency (+2.8% in actual terms), thus accounting for 21.4% of License sales. This illustrates the solid nature of ESI Group's business model, which is based on the growth and recurrent nature of the Licensing activity.
Services: particularly negative base effect
Services activity totalled €28.7 million, down -4.4% at constant currency and -8.9% in actual terms. This decrease was due to a negative base effect compared with 2012 (with its growth of +24.1%) and to the Group's policy of gradual withdrawal from non-strategic activities not related to our core business interests.
However, over the last three years Services activity has increased by an average of +7.4% a year at constant currency (+6.4% in actual terms), thus reflecting the demand of our industrial customers for support and co-creation projects as they transition towards digital factories.
Geographical diversification: dynamism of BRIC countries
In 2013, the geographical split of sales in actual terms reveals a move towards Europe (from 43.1% to 45.2% of sales) at the expense of Asia (from 36.8% to 35.8%) and the Americas (from 20.2% to 19.0%). However, if we take into account the currency impact, we observe instead a stable figure for European zone, an increase for Asia and a decrease for the Americas due to the reduction in Services activity in that region.
Activity in BRIC countries grew further, in line with the Group's strategy of accompanying industrialists in emerging regions demonstrating economic potential. These countries accounted for 15.4% of total sales over the period, compared with 13.1% in 2012 and giving buoyant growth of +17.9%.
Amplification of strategic partnerships and significant increase in the adoption of end-to-end virtual prototyping
The signing in May 2013 of a strategic cooperation agreement with the Renault group marked for that company an intensification of the deployment of end-to-end virtual prototyping and illustrated the imperative of manufacturing industries to possess disruptive technology. Consequent to that agreement we signed in January 2014 three-year contracts covering the services to be undertaken for Renault, its subsidiaries, and Nissan Motor. Similarly, the Volkswagen group has also reiterated its confidence in ESI Group by signing and extending for the eighth consecutive time its 3-year contract; this time with a broader scope. We note also that Honda Motor has committed itself to new co-creation projects related to use of new materials and the durability of its products.
These various agreements lay witness to the automotive industry's lead and predominance for virtual prototyping solutions; a real accelerator of innovation.
Like the automotive segment, the aeronautical and defence sectors, which are also subject to substantial competitive pressure and increasingly stringent environmental constraints, are highlighting the value added by ESI Group's methodological and technological approach. EADS has launched further co-creation projects in the fields of vibro-acoustics, composites and assembly. Also in the aeronautical sector, ESI Group has recorded substantial growth of business with AVIC in China; a reflection of AVIC's commitment to adopt ESI solutions even before the AVIC-ESI Joint Venture became effective on February 1, 2014. In the energy sector, AREVA signed a two-year engineering contract in line with its strategic plan aimed at strengthening its technological competitiveness, improving its economic performance and consolidating its nuclear security and safety policy.
The buoyant development of these strategic partnerships presages a more global deployment of virtual prototyping in all industries in the medium term.
Orders taken from our top twenty clients continue to represent a significant share of our activity: 46.0% (compared with 42.8% in 2012).
Successful integration of acquisitions with the ESI Group global offer
The acquisitions carried out by the Group represent leverage to accelerate the transition of major clients towards end-to-end virtual prototyping. To be specific, the integration of OpenCFD, leader in open source computational fluid dynamics software, has contributed to the acceleration in the deployment of ESI Group's expertise within the Volkswagen group. Furthermore, the immersive and distributed virtual reality concept developed following the acquisition of IC.IDO has proved to be a major marketing augmentation of the appeal of ESI Group's end-to-end virtual prototyping solution, as demonstrated by the numerous contracts signed in this domain across various industrial sectors. We note for example Jaguar Land Rover and Fiat in the automotive sector, Bausch+Ströbel in the pharmaceutical sector and Astrium, Boeing and AVIC in the aeronautical sector.
Most recently, the acquisition of CyDesign's innovative technology based on the modelling of systems and adaptive control technologies (0D-1D models), both in the Cloud and in SaaS mode, attests to the Group's strategic vision to accelerate the transition to end-to-end virtual engineering. It allows industrialists who wish to explore the design space of their new products without building real physical prototypes during the design phase; prototypes that tend to be very expensive and may even be impossible to create within an acceptable timeframe. This technology is aimed at positioning ESI Group's solutions to deliver value right from the product inception phase, and to address a broader base of innovative users.