PARIS, July 30, 2002 (PRIMEZONE) -- The Board of Directors of Lectra, chaired by Andre Harari, reviewed today the consolidated financial statements for the first half of 2002, following limited review by the Statutory Auditors. Technology spending by U.S. and European companies remained very weak in the first half of 2002, while their main Asian sub-contractors froze their own investments even more significantly.
(in millions of euros)
April 1st - June 30th January 1st - June 30th
2002 2001 2002 2001
Revenues 43.6 52.4 85.4 98.9
Income from
Operations (0.2) 0.7 (0.9) (1.2)
Pre-tax income (1) (0.6) 0.2 (1.7) (2.4)
Net income (0.6) (0.2) (1.7) (3.0)
Free cash flow (2) 1.6 (3.4) 8.7 (2.8)
Stockholder's equity
at June 30 72.9 77.9 72.9 77.9
Net cash at June 30 (3) 29.1 17.6 29.1 17.6
(1) Includes goodwill amortization of EUR 0.5 million in Q2 2002 and
EUR 0.9 million in H1 2002 (EUR 0.4 million and EUR 0.8 million
in 2001).
(2) Free cash flow: cash provided by operations less total
investments other than acquisitions.
(3) Net cash at June 30, 2002: free cash (EUR 33.5 million) less
financial debt (EUR 4.4 million).
Operating ratios continue to improve in Q2 2002
Company revenues remained below normal in the second quarter, due to persistently difficult business conditions. The U.S. dollar was down 12.5% against the euro, mechanically reducing revenues (by 3%), overheads (by 2%), and income from operations (by EUR 0.7 million), since 35% of revenues and 29% of overheads are U.S. dollar-denominated or directly linked to the dollar. Revenues were down 17% relative to Q2 2001 at EUR 43.6 million. They nevertheless rose 4% relative to Q1 2002. At constant exchange rates revenues declined 14% relative to Q2 2001 and rose 6% relative to Q1 2002. The revenue decline was partially offset by lower operating costs, thus limiting the operating loss for the quarter to EUR 0.2 million and the net loss to EUR 0.6 million. At constant exchange rates, income from operations would have been positive at EUR 0.5 million (+EUR 0.7 million in 2001).
First-half 2002 results
First-half revenues totaled EUR 85.4 million, down 14% from H1 2001 (13% at constant exchange rates). Revenues from sales of new software licenses, CAD/CAM equipment and related services totaled EUR 42.8 million, down 27%. Meanwhile, recurring revenues advanced 6%, accounting for 50% of first-half revenues (versus 41% in H1 2001).
North American revenues were stable, while in Europe they declined by 11% and by 29% in Asia-Pacific. These three regions account for 25%, 55% and 15%, respectively, of the company's total revenues.
Order backlog restored
Order backlog (excluding recurring revenues) at the beginning of the year was relatively slim, due to the impact of the September 11 events. Although new orders booked in the first half were down sharply relative to H1 2001, they nevertheless exceed revenues for the same period by EUR 7.4 million. The order backlog (excluding recurring revenues) at June 30, 2002 is back up at a level EUR 1.4 million greater than the corresponding figure at June 30, 2001.
Gross margin improves while fixed overheads decline sharply
Gross margin for the first half worked out to 68.3%, a 1.4 percentage point improvement relative to H1 2001. The cost-cutting program launched in March 2001 in response to the weakening global economy, combined with tight cost controls and continuous review of spending in light of persistently sluggish conditions, have together reduced fixed overheads by 12% (EUR 8.1 million) relative to H1 2001 (EUR 7.8 million at constant exchange rates). This reduction in overheads, combined with growth in recurring revenues, significantly lowered the company's breakeven point between 2001 and 2002. Despite the revenue decrease, the operating loss for the first half was thus limited to EUR 0.9 million (EUR 0.4 million at constant exchange rates), compared with an operating loss of EUR 1.2 million in 2001.
Free cash flow rises sharply to EUR 8.7 million and net cash is further bolstered
First-half free cash flow totaled EUR 8.7 million, a rise of EUR 11.5 million relative to H1 2001. Free cash flow exceeded net income by EUR 10.4 million, thanks mainly to a positive net cash provided by operating activities of EUR 10.0 million. Consolidated shareholders' equity at June 30, 2002 amounted to EUR 72.9 million. The balance sheet comprises only EUR 4.7 million in net intangible assets and EUR 13.3 million in net goodwill from acquisitions. At the same time, the company's net cash increased by EUR 9.5 million over the December 31, 2001 figure, amounting to EUR 29.1 million, its historical high.
Pending positive developments, the company takes a cautious yet confident view for the second half
There has been no visible sign of recovery in technology spending at the time of publication of this press release, and short-term visibility remains very poor. Forecasting remains difficult in current conditions.
Lectra further enhances its competitive position
Customers have given a warm welcome to the new Vector automated cutting systems launched at the start of the year, now available in versions geared to the needs of each market sector, together with the new solution for cutting leather for furniture & furnishings and car seats & interiors. Initial orders are promising. At the same time, the company launched new versions of its product data management and visual merchandising software. The company has continued to expand its sales to large corporate accounts, American in particular, booking a number of significant orders. Moreover, Lectra can count on its extremely solid financial fundamentals if the current economic weakness were to persist. Its fundamentals will also allow it to continue to finance vigorous, sustainable growth as soon as the world economy turns positive again.
Impact of the U.S. dollar's weakness
If the recent dollar weakness persists in the second half of the year, this could affect the company in three ways: mechanically in the translation into euro, on its markets, and on its competitive position. An average parity of 1 dollar to the euro would mechanically cut H2 revenues by nearly 4%, while cutting overheads by 3% and pre-tax income by EUR 1.6-1.8 million relative to H2 2001.
The weaker dollar should immediately restore the competitiveness of US companies, and more generally that of their main subcontractors worldwide, especially in Asia, and should significantly boost their levels of business activity until now damaged by the strong dollar. These impacts would revive technology spending, which has been frozen till now. Lectra has significantly reduced its exposure to the US dollar over the past ten years, and it believes that currency conditions remain favorable to the company for as long as the euro/dollar parity remains below or equal to 1. Its competitiveness and profitability would only start to suffer if the parity were to rise durably above USD 1.10 to the euro.
The company expects to return to profit in the second half
The company announced at the beginning of the year that, absent any major external event triggering a further deterioration in the economy, it expected to return to profit in 2002. In view of the dollar's decline and its mechanical effects, to achieve a positive net income in the second half, H2 revenues will now need to be EUR 3.3 million (+4%) greater than if the dollar parity had remained at its level at the start of the year. Barring any major new external event liable to trigger a further deterioration in the economy, the company believes this target should be either achieved or exceeded. Over the second half, Lectra still believes it could offset the net loss suffered in the first half of the year, although it considers this is less certain. The company would need to generate an additional EUR 4.5 million in revenues in order to break even over the full year.
Strong upside potential
Lectra's potential to bounce back-once the global economy starts to pick up-is all the greater in view of the fact that H1 2002 revenues from sales of new software licenses, CAD/CAM equipment and related services (the company's growth drivers) represent only 62% of the figure for the corresponding period of 2000. The Financial Report for the first half 2002 (including management discussion and the quarterly and half-year financial statements) is available at www.lectra.com. Third quarter 2002 results will be published on October 29, 2002, after the close of Euronext.
Lectra is a world leader in the design and distribution of software and hardware dedicated to the major industrial users of textiles, leather and other soft materials, supplying a comprehensive array of associated services for the development of complete solutions, from product design to manufacture to retailing. Lectra is present on all major markets, including fashion, apparel and retail distribution, luggage & leather goods, footwear, furniture & furnishings, transportation (the automotive, aeronautics and nautical industries), together with other industries working with industrial fabrics and composite materials.
With a staff of nearly 1,400 worldwide, Lectra generates 87% of its revenues outside France, thanks to a unique international network serving more than 10,000 customers in over 100 countries.
Lectra's shares are traded on the Second Marche of the Euronext Paris exchange (in the NextEconomy segment). They figure among the European technology stocks making up the FTSE eTX All-Shares, eTX Innovation and eTX Software indexes, and also among the French stocks making up the SBF 250, Midcac and Second Marche indexes of Euronext Paris.
Learn more about Lectra at www.lectra.com