Daniel Harari’s vision Chief Executive Officer
A business model that once again demonstrates its strength
In a context of uncertainty and apprehension relating to the trade war between the United States on the one hand and Mexico, China and Europe on the other, the entire year was marked by a wait-and-see attitude by many companies, which, in July, led us to lower our revenues and earnings expectations for 2019.
Nevertheless, with only a slight decline in operating income and a record 14.6% operating margin, our 2019 results demonstrate the strength of our business model, which is attributable primarily to recurring revenues and the gross profit margin they generate. Our business model also allows us to manage Lectra with a negative working capital requirement, resulting in record free cash flow in 2019, which exceeded net income.
A successful first step in the implementation of our Lectra 4.0 strategy
True to our long-term strategic focus, we launched our new strategy Lectra 4.0 in February 2017, with the aim of positioning Lectra as a key Industry 4.0 player between now and 2030.
This was accompanied by the first roadmap, for 2017-2019, which has now been successfully completed. In particular, we launched our initial Industry 4.0 offers with the successful start of the transition of software sales towards the SaaS model, while also launching new versions of our flagship offers.
We also completed the acquisition of Kubix Lab and Retviews, two high-potential start-ups with innovative technologies that we will be able to capitalize on in the coming years.
Finally, we achieved record recurring revenues and further strengthened our balance sheet, with shareholders’ equity of 183 million euros and a net cash position of 120 million euros at December 31, 2019, which will enable us to move forward with our acquisition strategy.
A new strategic roadmap for 2020-2022
We will continue to implement our Lectra 4.0 strategy over the next three years to strengthen our global leadership and capture the full potential of our new offers for Industry 4.0, while ensuring sustainable, profitable business growth.
We have set ourselves four strategic priorities:
- (i) accelerate organic growth, (ii) strengthen customer relations, (iii) extend the offers for Industry 4.0, and (iv) develop new areas for growth.
To achieve this, we will pursue our sustained investment in R&D and strengthen our sales and services teams, using the growth in gross margin generated by recurring revenues to finance our development.
We are entering this new period with solid operating fundamentals and a particularly robust balance sheet, combined with an enhanced offer that is now available worldwide, enabling our customers to implement the principles of Industry 4.0.
An unpredictable 2020, marked by the COVID-19 crisis
Unfortunately, the year 2020 is shaping up to be unpredictable, given the COVID-19 epidemic which, beyond the periods of containment and shutdown of part of the economy, will have a significant impact on the Group’s activities, and on its customers’ activities, with different situations depending on the country.
The consequences of this unprecedented type of crisis on the Group’s financial statements nevertheless remain difficult to assess at this time.
Bolstered by the strength of our business model and a new roadmap fully geared to the demands of Industry 4.0, despite this particularly difficult context we are confident in our growth prospects for the medium term.
I hope that you will find this report of interest and trust it provides the information you require.
Chairman and Chief Executive Officer, Lectra