PARIS, Oct. 29, 2002 (PRIMEZONE) -- The Board of Directors of Lectra (Paris:LECS), chaired by Andre Harari, reviewed today the unaudited consolidated financial statements for the third quarter and the first nine months of 2002.
THIRD QUARTER 2002:
- ORDERS UP 23%
- INCOME FROM OPERATIONS: EUR 2.7 MILLION
FIRST NINE MONTHS 2002:
- LECTRA RETURNS TO PROFIT
- FREE CASH FLOW: EUR 13 MILLION
(in millions of euros)
July 1 - Sept. 30 Jan. 1 - Sept. 30
2002 2001 2002 2001
Revenues 45.5 46.9 131 145.8
Income from
operations 2.7 0.3 1.8 -0.9
Pre-tax
income (1) 2.7 -0.4 1 -2.8
Net income 1.9 -0.6 0.2 -3.6
Free cash
flow (2) 4.3 -2.2 13 -5
Stockholders'
equity at
Sept 30 74.2 75.9 74.2 75.9
Net cash at
Sept 30 (3) 32.1 15.3 32.1 15.3
(1) Includes goodwill amortization of EUR 0.4 million in Q3 2002 and EUR 1.4 million in the first nine months 2002 (EUR 0.4 million and EUR 1.2 million in 2001).
(2) Free cash flow: cash provided by operations less total investments other than acquisitions.
(3) Net cash at September 30, 2002: free cash (EUR 36.3 million) less financial debt (EUR 4.2 million).
Q3 2002 RESULTS
Orders Are Up Sharply
Despite persistently difficult business conditions, business activity rose significantly in the third quarter, although order volumes were still not back up to normal levels.
Orders for new software licenses CAD/CAM equipment and related services (excluding recurring revenues) booked in the third quarter are up 23% relative to Q3 2001, a period affected by the tragic events of September 11, registering a distinct change of direction relative to the previous four quarters. They are also up 18% relative to Q2 2002, despite generally weak activity in Europe due to the July-August vacation season.
The increase primarily reflects strong performances in the United States and China. The CISMA tradeshow in Shanghai, in September-during which USD 2.3 million in orders were booked-demonstrated China's potential demand for technology equipment (in all of the company's market sectors).
The increase in orders booked during the quarter further bolstered the company's backlog (excluding recurring revenues) compared to June 30, 2002.
Revenues Unchanged at Constant Exchange Rates
Q3 revenues totaled EUR 45.5 million, down 3% relative to Q3 2001. At constant exchange rates, they were up 1% relative to Q3 2001.
Q3 revenues nevertheless rose 5% relative to Q2 2002 (7% at constant exchange rates). Contrary to new orders booked, shipments in Q3 2001 were not significantly affected by the September 11 events.
Earnings Improve Distinctly
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 reduced fixed overheads beyond the company's initial expectations. Fixed overheads were down 11% (EUR 3.1 million) relative to Q3 2001, when the first positive effects of the plan were starting to be felt; the decline works out to 7% at constant exchange rates.
Gross margin for the quarter worked out to 66.8%, a 1.8 percentage point improvement over Q3 2001 (65.0%); at constant exchange rates, gross margin would have worked out to 67.7%, a 2.7 percentage point improvement.
Consequently, and despite the revenue decline, the company achieved a third-quarter income from operations of EUR 2.7 million and a net income of EUR 1.9 million. At constant exchange rates, income from operations worked out to EUR 3.3 million (EUR 0.3 million in 2001), making an increase of EUR 3.0 million relative to Q3 2001.
The Company Continues to Generate a High Level of Free Cash Flow
Free cash flow generated in the quarter was positive at EUR 4.3 million, a EUR 6.5 million improvement over Q3 2001 (EUR -2.2 million). This was a direct result of programs implemented in 2001 and pursued in 2002 to bolster the company's net cash without jeopardizing ongoing expansion.
FIRST NINE MONTHS 2002 RESULTS
Business Activity Hurt by Slowdown in Technology Investment
Thanks to the surge in orders booked in the third quarter, the decline in total orders for new software licenses CAD/CAM equipment and related services (excluding recurring revenues) booked over the first nine months has been reduced to 9% relative to the corresponding period of 2001, as opposed to 21% at June 30. Orders, expressed in US dollars, booked in North America were up 38%, while those booked in Greater China advanced 20%.
Revenues for the first nine months 2002 totaled EUR 131.0 million, down 10% relative to 2001. At constant exchange rates, revenues were down 8%. Revenues have risen steadily since the beginning of the year, from EUR 41.9 million in Q1 to EUR 43.6 million in Q2, to EUR 45.5 million in Q3 (an increase of 9% between the first and third quarters).
Recurring revenues have grown by 4% over the same period in 2001 (6% at constant exchange rates). They accounted for 48% of total revenues (42% in 2001). In geographic terms, North American revenues rose 9% in US dollars. European revenues were down 10%. Asia-Pacific revenues declined 15% at constant exchange rates, the third quarter reducing the 27% fall in the first half thanks to improved performance in China and Japan.
North America, Europe and Asia-Pacific accounted for 25%, 54% and 16% of the company's total revenues respectively.
Order Backlog Expands
The company began the year with a limited backlog (excluding recurring revenues) of EUR 8.1 million due to the impact of the September 11 events. But with new orders booked exceeding revenues by EUR 11.1 million, Lectra has rebuilt and further bolstered its backlog at September 30, 2002 (EUR 19.2 million versus EUR 15.7 million at June 30, 2002).
Gross Margin Improves - Overheads Down Sharply
Gross margin for the period worked out to 67.8%, a 1.5 percentage point improvement over 2001 (66.3%).
Overheads totaled EUR 87.0 million, down 11% (EUR 10.6 million) relative to 2001.
Third-Quarter Earnings Offset First-Half Loss
Q3 income from operations (EUR 2.7 million) has offset the first-half loss from operations (EUR -0.9 million), generating EUR 1.8 million in income from operations over the first nine months of 2002. At constant exchange rates, income from operations would have amounted to EUR 3.0 million, an increase of EUR 3.9 million relative to the comparable period of last year (EUR -0.9 million).
The sharp fall in fixed overheads combined with growth in recurring revenues significantly lowered the company's breakeven point between 2001 and 2002.
Net income was positive at EUR 0.2 million, Q3 net income of EUR 1.9 million having offset the first-half net loss of EUR 1.7 million. This represents a year-to-year improvement of EUR 3.8 million.
Record Net Cash
Free cash flow generated in the first nine months totaled EUR 13.0 million, a rise of EUR 18.0 million relative to the first nine months of 2001 (a negative EUR 5.0 million). This exceeded net income by EUR 12.8 million, thanks to positive net cash provided by operating activities of EUR 15.4 million and investment spending of EUR 2.4 million.
Consolidated shareholders' equity at September 30, 2002 amounted to EUR 74.2 million. The balance sheet comprises only EUR 4.3 million in net intangible assets and EUR 12.9 million in net goodwill.
At the same time, the company's net cash increased by EUR 12.5 million over the December 31, 2001 figure, amounting to EUR 32.1 million, its historical high.
THE COMPANY NOW EXPECTS TO REPORT A FULL-YEAR PROFIT FOR 2002
Forecasting remains difficult in current conditions. In its Management Discussion of July 29, 2002 Lectra forecast a positive second half 2002, despite the US dollar's fall.
In addition, the company had announced that it still believed it could offset, over the second half, the net loss suffered in the first half of the year, but that this was less certain. Third-quarter results confirm that, barring any major new external event liable to trigger a further deterioration in the economy, this objective will now be achieved, and could be exceeded.
Although business activity picked up in the third quarter, there has been no concrete sign of a sustainable upturn in technology investment to date. Therefore, the company continues to take a cautious view.
Revenues for the first nine months of 2002 from new software licenses, CAD/CAM equipment and related services (the company's growth driver) stand at only 64% of the figure for the corresponding period of 2000. This is clear evidence of Lectra's potential to bounce back once the global economy starts to pick up.
The Financial Report for Q3 and the first nine months 2002 (including the Management Discussion and Financial Statements) is available at www.lectra.com. Full-year 2002 final results will be published on February 10, 2003, 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