INDRA POSTED NET PROFIT OF 70 MILLION EUROS IN 2016

Indra’s net profit in 2016 totaled €70m vs. losses of €-641m registered in 2015 (due to extraordinary adjustments).

It’s worth highlighting the strong cash generation in 2016 (+184M€) thanks to the improvement in operating activity and net working capital, and despite the cash outflow caused by the redundancy plan and the problematic projects.

Order Intake grew again in 4Q16 and increased +6% in 2016.

EBITDA reached €229m vs. €131m in 2015, implying an EBITDA margin expansion throughout the year to 8.5% vs. 4.6% in 2015.

EBIT margin reached 6.0%, improving substantially versus last year (recurrent EBIT margin 2015: 1.6%), due to higher Direct Margins in ongoing projects, and efficiency plans put in place and fewer problematic projects.

And Net Debt was substantially reduced (down by -25%) vs. December 2015, to €523m.

2016 Revenues reached €2,709m, which implies a decline of -3% in local currency (-5% in reported figures). T&D verticals registered positive growth (+1% in local currency; flat in reported terms), while IT verticals declined -5% in local currency (-8% in reported figures) affected by the negative sector and region dynamics, and the seasonality of the Election business. In 4Q16 sales were down -3% in local currency (-3% in reported terms) as a consequence of, among other things, the slowdown in Transport & Traffic due to delays in some projects and specific issues that affected negatively the IT segment (mainly explained by less contribution of the Election business and the loss of a relevant BPO contract in Telecom & Media).

Exchange rates had a negative impact of €61m in the year. This impact was mainly concentrated in 1H16 (€58m), neutral in 3Q16 and had a slight positive impact in 4Q16.  

Order intake grew +6% in local currency in 2016 (+4% in reported figures). The pace of recovery, initiated in previous quarters, has maintained in 4Q16 (+4% in local currency; +5% in reported figures), mainly in IT, while T&D slowed down due to the high level of order intake registered last year in 4Q associated with the contracts signed with Spain’s Ministry of Defence (MoD).

Other income totaled €63m, compared to €86m in 2015, as a result of lower subsidies and R&D capitalization in the period. Excluding both effects, other income would have been similar to that recorded in 2015.

OPEX (Operating Expenses) fell by -9%, to €2,543m in 2016, mainly due to the ongoing restructuring initiatives and a lower level of sales:

• Materials consumed and other operating expenses were down by -12% to €1,199m as a result of lower level of sales, fewer subcontractors and savings linked to the ongoing cost optimization plan. In the fourth quarter, Materials consumed and other operating expenses declined by -3% vs. 4Q15. 

• Personnel expenses reached €1,342m, declining -7% in 2016 as a result of the lower average workforce in the period (-8%). In 4Q16, personnel expenses declined only -3% vs. 4Q15 due to the high level of completion of the headcount reduction plan in Spain at year end in 2015.

Contribution margin in 2016 reached 14.0% vs. 9.2% in 2015 (+4.8pp):

• T&D contribution margin (Transport & Traffic and Defence & Security verticals) up by +4.3pp to 19.1% in 2016 (vs 14.8% in 2015) as a consequence of the operating improvement in Defence & Security and despite the underway restructuring in the Transport & Traffic vertical. 

• IT contribution margin (9.8%) was +4.8pp higher than in 2015 (5.0%) due to the losses registered last year in some projects (mainly in Brazil, Financial Services and Public Administrations & Healthcare verticals) and the optimization plans put in place throughout the year.

EBITDA reached €229m in 2016 (despite the decline in sales) compared to €131m in 2015, equivalent to an EBITDA margin of 8.5% in 2016 vs. 4.6% in 2015.

D&A reached €68m compared to €85m in 2015 (-21%) due to lower recognition and amortization of the corresponding subsidies related to R&D projects. Excluding this impact, D&A would have been similar to that registered in 2015.

 Direct Margin in 2016 increased mainly thanks to the improvement of the problematic projects provisioned in 2015, efficiency plans put in place and higher profitability in ongoing projects. Below the Direct Margin, the optimization plan contributed also to the EBIT margin expansion. As a result, recurrent EBIT reached €162m in 2016, equivalent to an EBIT margin of 6.0% (vs. 1.6% in 2015), despite having included €49m of new provisions booked related to additional problematic projects. 

 The improvement in the recurrent EBIT margin in 4Q16 (7.6% vs. 5.3% in 9M16), is explained by the higher level of sales registered in the fourth quarter vs. previous quarters (as a result of the inherent seasonality of the business). It’s worth noting that despite the lower level of sales in 4Q16 vs. 4Q15, EBIT margin increased +1.6pp vs. 4Q15 (6.0%) as a result of the different optimization plans and ongoing improvements put in place.

 Financial Result decreased to €-39m from €-64m in 2015 as a consequence of the reduction in gross average borrowing costs by -1.1pp to 2.8% (mainly due to lower share of Brazil’s debt).

Tax expenses reached €54m in 2016, equivalent to a tax rate of 43% as a result of, among other things, certain limits in the application of tax credits (mainly in Brazil), no taxation in Bahrain due to its fiscal legislation and closing of some subsidiaries.

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