MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Dear Shareholders, This Management Discussion and Analysis reports on the company’s operations and ﬁnancial results, as well as on those of all of its subsidiaries, for its 41st ﬁscal year, ended December 31, 2014. It is separate from the report of the Board of Directors to the Ordinary Shareholders’ Meeting of April 30, 2015 (available in French only), which, in addition, discusses in detail the ﬁnancial statements and other disclosures relating to the parent company, Lectra SA, presents its report on the Group’s corporate social and environmental responsibility information in the framework of the “Grenelle II” Act and the reasons underlying the draft resolutions submitted for approval by the shareholders. To make the discussion of revenues and earnings as meaningful as possible, detailed comparisons between 2014 and 2013 are based on 2013 exchange rates (“like-for-like”) unless stated otherwise.
Income from Operations and Net Income Above the Company’s Minimum Objective The company’s objective communicated in its ﬁnancial report on February 11, 2014 was to generate minimum revenues of approximately €214 million (+7% relative to 2013) for the ﬁscal year, income from operations of around €18 million (+10%), an operating margin of 8.3% (increasing slightly), and net income of around €12.5 million (unchanged at actual exchange rates, excluding 2013 non-recurring items). While, at actual exchange rates, revenues for 2014 (€211.3 million) are 1% lower than this objective, income from operations (€19.8 million) is €1.8 million ahead and operating margin (9.4%) is 1.1 percentage points higher, thanks to an improved sales mix, improved margins and lower-than-expected overhead costs. Net income (€14.4 million) exceeds the objective by €1.9 million. Growth in Revenues — Sharp Increase in the Order Backlog Revenues from new systems sales (€88.6 million) rose by 5% compared to 2013. This is less than the amount for new orders booked (€94.3 million). Consequently the order backlog of €19.6 million at December 31, 2014 was up sharply relative to the January 1 ﬁgure of €13.2 million. Recurring revenues (€122.8 million) increased by €5.3 million (+5%). Revenues from recurring contracts increased by 4% and revenues from spare parts and consumables by 5%. The increase in the gross margin on recurring revenues alone covered more than 80% of the increase in ﬁxed overhead costs. Total revenues (€211.3 million) were up by 5% relative to 2013. Revenues increased 10% in Europe and 8% in Asia-Paciﬁc, but decreased 6% in the Americas. These three regions accounted for 46% (including 8% for France), 23% and 24% of revenues respectively. Revenues from the rest of the world (7% of total revenues) decreased by 3%. In 2013, these regions accounted for 44% (including 8% for France), 22%, 27% and 7% of total revenues respectively.
1. SUMMARY OF EVENTS AND PERFORMANCE IN 2014