- Revenues in Spain grew +5% (third consecutive quarter of positive growth rate). It is worth highlighting the positive trend of revenues in Transport & Traffic; Security & Defense; and PPAA.
- Revenues in Latam grew +1%, with positive growth rates in Financial Services, Transport & Traffic, Energy & Industry, and Security & Defense.
- Recurring EBIT margin falls 7.2 pp. to 0.5%, basically because of the overruns in specific projects in Brazil (Financial Services and Public Administrations) and Lithuania (railway traffic project), and the seasonality associated with the Elections. These issues represent 6.6 pp. of the fall.
- A number of management actions are already in place to put those projects in Brazil back on track.
- Free Cash Flow totaled -€79m, versus €21m in 1Q14. This divergence is caused by the two specific issues aforementioned and the extraordinary collection from the execution of the plan to regularize pending payments to suppliers by Spanish Public Administrations that took place in 1Q14.
- Indra has renewed its Board with the appointment of Enrique De Leyva as independent Board member; and José Antonio Escalona as new Secretary of the Board; It has launched a new organization seeking to improve the coordination and accelerate decision-making; and will propose a new compensation scheme for Senior Management and Board of Directors aligned to International Standards and the new Code of Good Governance, with a higher weight of Variable Remuneration and shares, and more linked to the completion of Free Cash Flow, EBIT and Order intake targets.
- The company will host an Investor Day on July 8th to outline its strategic lines, operating plans, and medium terms financial indications.
- Considering 2014 results, the Board of Directors has resolved not to submit a proposal of dividend distribution with a charge to unrestricted reserves.
Indra’s revenues were €702m, decreasing by -5% in local currency (-4% in reported terms) negatively affected by the seasonality of Elections, with a strong impact in an isolated quarter; that it is expected to be mitigated throughout the year. Excluding Election’s impact in 1Q14 (basically in AMEA and Latam), revenues would have increased by +5%.
Other income stands at €33m versus €16m of 1Q14 due to the accounting of the R&D subsidies for finalized projects. Excluding this impact, Other Income would have reached similar levels than in 1Q14.
Operating expenses (OPEX) reached €701m, which represents a growth of +4% respecting 1Q14 (€673m), due to the increase of Materials consumed and Other operating expenses (+7%) as a consequent of the overruns aforementioned in Financial Services and Transport & Traffic. Despite the increase in Indra’s workforce (+5%), Personal expenses are similar than the ones reported in 1Q14.
Contribution margin (9.0%), decreased -6.0 pp. versus 1Q14:
- Contribution margin in Solutions (9.0%) has decreased -7.9 pp. versus the same period of the previous year as a result, among other things, of the deterioration of the activity in Latam (especially in Brazil because of the overruns incurred in certain contracts in FFSS and PPAA), the lower component of Elections and the specific problems in Lithuania.
- Contribution margin in Services was 8.9%, -2.8 pp. lower versus 1Q14, as pricing pressure in some verticals and geographies (mainly in Spain and Latam) remains.
D&A reached €31m in 1Q15 versus €15m in 1Q14 as a result of the application and amortization of the corresponding subsidies to R&D finalized projects. Excluding this impact, D&A would have been similar to the one registered in 1Q14.
Recurrent operating profit (EBIT before non-recurring costs) accounted for €3m versus €56m in 1Q14, with a recurrent operating margin of 0.5% (vs. 7.7% in 1Q14). This fall of 7.2 pp. in the profitability of the company has been caused, among other things, by the following issues:
- Seasonality of Elections, with a relevant positive contribution to the profitability in 1Q14 (especially in Latam and AMEA).
- Overruns in Brazil, basically in verticals such as Financial Services and Public Administrations. The problems are caused by the overruns incurred in some implementations of third-party solutions in Financial Services (already mentioned in previous results’ publications), and the project management of SAP implementation. A number of management actions are already in place to put these projects back on track.
- Recently incurred overruns in a specific railway traffic management project in Lithuania, where the changes in the initial terms of the contract have produced a relevant drop in the associated profitability of the project, which is expected to be recovered in new orders in the coming years.
- The increase in the Structure and Operative costs.
Despite the rise in Net Debt, financial expenditures slightly decrease (€12.6m versus €13.2m in 1Q14) due to the fall of 0.9 pp. to 4.3% achieved in the average cost of debt.
Share of profits of associates and other investees reached -€2.0m versus €3.4m in 1Q14. The difference is explained by the extraordinary result of +€3.9m that happened in 1Q14 regarding a more favorable agreement reached with Indra Italia’s minorities related to the final payment to be paid in May 2016 (€3.7m) for its 22.5% stake.
Despite the negative Profit Before Taxes, the company has reported Taxes of €4.1m given the limits for the application of the tax credits generated in subsidiaries like Brazil.
Attributable (recurrent) profit (excluding non-recurring costs) reported -€16m, versus a positive result of €36m in 1Q14. Net Profit reached -€20m.
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