A clear and ambitious strategy
“China, the automotive market, and PLM for fashion and apparel will be our three growth accelerators in 2015-2016.” “We maintain the financial goals we have set for 2016 unchanged, and we remain confident in our growth prospects for the medium term.”
Your cash continues to grow. How do you plan to use it? ANDRÉ HARARI: Our business model generates enough free cash flow to enable us to pursue our policy of paying dividends to shareholders while financing our future development and remaining debt-free. The Board of Directors will propose to the annual Shareholders’ Meeting to increase the dividend from €0.22 to €0.25 per share in respect of fiscal year 2014. As announced in 2013, there will be no share buybacks, as the company prefers to keep its cash for targeted acquisitions in the coming years. However, we are not contemplating any external growth, barring some exceptional opportunity, until we have completed our 2013-2016 roadmap. Are your five growth accelerators still valid? DANIEL HARARI: Their respective contributions to the development of Lectra’s activity appear today to vary widely. Of the eight growth economies forecast to account for half of global growth over the current decade, China alone is expected to represent around a third of our potential growth over the next two years and into the medium term, followed by South Korea. The United States, Germany, France and
Italy will account for most of the expected remainder, increasing progressively in the medium term. The automotive market’s share is expected to increase further, under the combined impact of the strong expansion in the markets of emerging countries, the rising proportion of leather-upholstered car interiors, and the growing use of airbags per vehicle, in both 2015-2016 as well as in the medium term. The automotive market will be the main source of growth in leather because of its faster take-up of new technologies than in furniture and fashion. Finally, in fashion and apparel, market globalization, the rise in consumption in the emerging countries and in Internet sales are all expected to boost the demand for PLM software as of 2015-2016. On the other hand, 3D technology represents an unavoidable revolution for businesses, which will prompt a radical rethink of their development methods, meaning adoption will take longer than expected. ANDRÉ HARARI: To sum up, China, the automotive market and PLM for fashion and apparel will be our three growth accelerators for 2015-2016. In the medium term, leather for furniture and fashion, and 3D technology, will play a growing role.
So you are confirming your objectives for 2016? ANDRÉ HARARI: While revenue from new systems again fell short of the roadmap for the year in 2014, recurring revenues, on the other hand, grew faster than expected. Our profitability ratios were better than expected, especially the overall gross profit margin and operating margin. Our security ratio too, i.e. the share of annual fixed overhead costs covered by the gross profit on recurring revenues, is extremely robust, at 79% and above our objective of 75%. In addition, fixed overhead costs other than investments for the future were below budget, and all our other metrics are in line with or better than expected. With all this, coupled with the growth potential of our markets and our sales successes during the year, we maintain the financial goals we have set for 2016 unchanged, and we remain confident in our growth prospects for the medium term. Recent trends in currency parities ought to have a favorable impact… DANIEL HARARI: Definitely. The euro’s fall since summer 2014 against the dollar and the yuan was a major event for Lectra. Our main competitor, a US firm, and most of our other competitors, manufacture
LECTRA — 2014 ANNUAL REPORT