0
CONTENTS
1
THE GROUP
5
1.1.
ACTIVITIES, STRATEGY AND MARKETS
6
1.2.
HISTORY OF THE GROUP
13
1.3.
GROUP ORGANIZATION
14
1.4.
SELECTED INFORMATION
15
2
REPORT ON CORPORATE GOVERNANCE
19
2.1.
GOVERNANCE CODE
20
2.2.
FUNCTIONING OF THE GENERAL MANAGEMENT
21
2.3.
BOARD OF DIRECTORS
22
2.4.
COMPENSATION PAID TO THE DIRECTORS
AND THE MANAGEMENT
36
2.5.
ADDITIONAL INFORMATION IN RESPECT
OF CORPORATE GOVERNANCE
48
2.6.
STATUTORY AUDITOR’S REPORT ON REGULATED
AGREEMENTS
52
3
RISKS AND RISK MANAGEMENT
53
3.1.
RISK FACTORS
54
3.2.
INTERNAL CONTROL AND RISK MANAGEMENT
PROCEDURES
57
4
STATEMENT ON EXTRA-FINANCIAL
PERFORMANCE
63
4.1.
ESI – CORPORATE SOCIAL RESPONSIBILITY
64
4.2.
ESI – A COMMITTED GROUP
65
4.3.
BEING A COMMITTED EMPLOYER
69
4.4.
BEING AN OUTSTANDING PARTNER
77
4.5.
BEING AN ETHICAL AND COMMITTED COMPANY
81
4.6.
BEING AN ENVIRONMENTALLY FRIENDLY
PLAYER
84
4.7.
EUROPEAN TAXONOMY
89
4.8.
REPORTING
92
5
MANAGEMENT REPORT
97
5.1.
BUSINESS ACTIVITIES DURING THE 2022
FINANCIAL YEAR
98
5.2.
OUTLOOK
102
5.3.
TABLE SUMMARIZING THE RESULTS OF PAST
FINANCIAL YEARS
102
6
FINANCIAL STATEMENTS
103
6.1.
CONSOLIDATED FINANCIAL STATEMENTS
104
6.2.
ESI GROUP ANNUAL FINANCIAL
STATEMENTS
143
7
RESOLUTIONS SUBMITTED
TO THE GENERAL MEETING
171
7.1.
DECISIONS FALLING WITHIN THE
COMPETENCE OF THE ORDINARY GENERAL
MEETING
172
7.2.
DECISIONS FALLING WITHIN THE
COMPETENCE OF THE EXTRAORDINARY
GENERAL MEETING
175
7.3.
JOINT DECISIONS
176
8
INFORMATION ON THE COMPANY
AND SHARE CAPITAL
177
8.1.
INFORMATION ON THE COMPANY
178
8.2.
INFORMATION ON THE COMPANY’S CAPITAL
179
8.3.
ESI SHARES – MARKET
184
9
ADDITIONAL INFORMATION
185
9.1.
PERSONS RESPONSIBLE FOR THE
UNIVERSAL REGISTRATION DOCUMENT
186
9.2.
STATUTORY AUDITORS
186
9.3.
DOCUMENT AVAILABLE TO THE PUBLIC
187
9.4.
INFORMATION INCLUDED BY REFERENCE
187
CROSS-REFERENCE TABLES
188
REGULATORY TABLES
194
KEYWORDS OF THE 2022 UNIVERSAL
REGISTRATION DOCUMENT
200
UNIVERSAL
REGISTRATION
DOCUMENT
including the annual financial report
This Universal Registration Document was filed on March 17, 2023 with the Autorité des Marchés Financiers (AMF), as competent authority under
Regulation (EU) 2017/1129, without prior approval pursuant to Article 9 of said regulation.
The Universal Registration Document may be used for the purposes of an offer to the public of securities or admission of securities to trading
on a regulated market if completed by a securities note and, if applicable, a summary and any amendments to the Universal Registration
Document. The whole is approved by the AMF in accordance with Regulation (EU) 2017/1129.
This Document is a reproduction of the official version of the Universal Registration Document including the 2022 Annual Financial Report
prepared in accordance with the European Single Electronic Format (ESEF) and filed with the AMF, available on ESI Group’s website (www.esi-
group.com) and on the AMF’s website (www.amf-france.org).
This document is a non-binding “free” translation from French into English and has no legal value other than an informative one. Should there
be any difference between the French and the English version, only the text in French language shall be deemed authentic and considered as
expressing the exact information published by ESI Group.
French and English copies of this document are available free of charge from ESI Group (the “Company” or the “Group”) – 3 bis rue Saarinen, 94150
Rungis, France.
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
1
Dear Shareholders,
As we present our Universal Registration Document, I would
like to take a moment to reflect on the leadership and
governance of ESI Group over the past year. Despite the
difficult international context, we have continued to focus our
activities, divesting our distractions and delivering on our
commitments.
I am incredibly proud of the leadership team at ESI Group,
who have skillfully steered the company through this
challenging time. Their dedication and strategic vision have
been instrumental in our success. Additionally, our Board of
Directors has remained actively engaged, providing oversight
and guidance, to ensure that we stay aligned with our strategic
objectives.
As we continue to pursue our mission of being a leader in
virtual prototyping software, we are committed to maintaining
the highest standards of corporate governance. We believe
that good governance is essential to the long-term success of
our company, and we remain steadfast in our commitment to
transparency, accountability, and integrity.
Furthermore, we have continued to focus our activities on our
core competencies, divesting ourselves of distractions that do
not align with our strategic vision. This has allowed us to
sharpen our focus and better serve our customers, at the
heart of everything we do.
I would like to extend my heartfelt thanks to the entire ESI
Group team for their hard work and dedication, which have
enabled us to achieve our goals. And of course, I would like to
express my gratitude to our shareholders for their continued
support and trust in our company.
Sincerely,
Alex Davern
Chairman of the Board, ESI Group.
(a)
Adjusted EBIT is a non-GAAP indicator based on EBIT (IFRS). Adjusted EBIT corresponds to EBIT before stock-based compensation expenses, restructuring
charges, impairment charges of intangible assets, amortization of intangibles assets related to acquisition, the application of IFRS 16 standard on leases
and other non-recurring items (including net gain and losses on disposals).
(b)
Adjusted EBIT margin is calculated based on revenue excluding special projects (public grant for R&D projects).
(c)
At constant perimeter (see definition on section 5.1.2.2).
(d)
All revenues from license sales (including maintenance services) excluding revenues from perpetual licenses and before changes in deferred revenues.
2
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
Dear Shareholders, Customers, and Employees,
I am thrilled to present the Universal Registration Document
of ESI Group, a leading global virtual prototyping software
company. As we reflect on the past year, I am proud to report
that 2022 was a year of exceptional progress and
transformation for our Group. We made remarkable strides
towards achieving our three-year “OneESI 2024 – Focus to
Grow” plan, and we are well on our way to realizing our vision
of becoming a strategic partner for the digital transformation
of industry.
Our team’s commitment to sustainable growth is unwavering,
even amidst a challenging economic environment. In 2022, we
exceeded our expectations, achieving faster-than-anticipated
progress in all aspects of our plan. Our passion for positive
impact, and combined with our predictive, real-time,
immersive physics-powered simulation solutions, extensive
talent, and intellectual property, help our clients save valuable
time, resources, and money by avoiding costly and limited
physical testing.
As One ESI, we unlock our true potential, enabling us to solve
complex simulation problems at scale and help industries
become cleaner, safer, and more productive. Our efforts have
translated to impressive financial results in FY22, with
recurring software revenue growing 7.4% to exceed 100ME,
and our adjusted profitability improving by approximately 5
points to reach nearly 12% of revenue.
None of this success would have been possible without our
employees’ dedication and hard work, who are constantly
innovating and improving our products and services. As we
continue to invest in our team, we are confident that we can
remain at the forefront of the virtual prototyping industry and
become an even more valuable strategic partner for our
clients.
We also took several bold steps in 2022 to enhance our
market position, including divesting non-core activities,
globalizing our teams, professionalizing our operations, and
expanding our position within the ecosystem. These actions
enable us to offer more value to our customers and better
meet their evolving needs.
As we continue to focus on innovation and growth, we remain
grateful for the support and trust of our customers and
partners. We are excited to continue working together to help
them on their journey to a cleaner, safer, and more productive
industry.
I would like to acknowledge the invaluable support of our
Board of Directors, whose guidance and expertise have been
instrumental in our success. Looking ahead, we are committed
to our vision of becoming a strategic partner for the digital
transformation of industry. We are confident in our ability to
navigate the challenges that may arise and excited about the
opportunities that lie ahead.
Thank you for your continued support, and we look forward to
sharing our progress with you in the coming year.
Sincerely,
Cristel de Rouvray
CEO, ESI Group
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
3
CONTENTS
1
2
3
4
5
6
7
8
9
4
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
ESI IN FIGURES
SELECTED FINANCIAL INFORMATION
GEOGRAPHY SPLIT
€129.7M • + 3%
+ 2.1% cer (constant exchange rate)
€15.0M • 11.6%
1,000
employees
20
countries
50 years
in business
€100.6M • + 7.4%
+ 6.5% cer (constant exchange rate)
Annual Recurring
Revenue (ARR) (a) (d)
Adjusted EBIT (b) (d)
Revenue 2022 (c) (d)
(a) Annual Recurring Revenue (ARR) : all revenues from license sales (including maintenance services) excluding revenues from perpetual licenses and
before changes in deferred revenues.
(b) Adjusted EBIT is a non-IFRS indicator based on EBIT (IFRS). Adjusted EBIT corresponds to EBIT before stock-based compensation expenses,
restructuring charges, Impairment & amortization of intangible assets related to acquisitions or disposals, Application of IFRS 16 (leases) and other
non-recurring items (including net gains and losses from disposals).
(c) Definition on part 5.1.2.2 of this document.
(d) At constant perimeter.
INDUSTRY SPLIT
Automotive &
Land transportation
Aerospace,
Defense & Naval
Heavy
industry
Energy
16.2%
€21.0M
+ 15.9%
+ 4.2% cer
37.3%
€48.4M
- 0.2%
+ 0.4% cer
46.6%
€60.4M
+ 1.6%
+ 1.3% cer
Americas
Asia-Pacific
Europe,
Middle East
and Africa
93% of the license revenue (before deferred revenue) from four focus industries
IN BRIEF
CHAPTER 1
ESI Group, a leading software partner in selected virtual test markets, leveraging
predictive physics IP and platform for chaining (a) to enable a cleaner, safer, and more
productive industry.
(a) Differentiated capability to chain physics, processes and data within customers’ digital thread allows customers to connect previously siloed
elements on the simulation workflow, brought to life by a common user interface.
1
THE
GROUP
1.1.
ACTIVITIES, STRATEGY AND MARKETS
6
1.1.1.
Main activities
6
1.1.2.
Main markets
7
1.1.3.
Core strategic vision
9
1.1.4.
A focused multi-horizon offer
11
1.1.5.
Research and development (R&D) policy
12
1.1.6.
Ecosystem
12
1.2.
HISTORY OF THE GROUP
13
1.3.
GROUP ORGANIZATION
14
1.3.1.
Operational flowchart
14
1.3.2.
Legal flowchart
14
1.4.
SELECTED INFORMATION
15
1.4.1.
Financial information
15
1.4.2.
Extra-financial information
17
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
5
CONTENTS
In this Universal Registration Document, ESI Group is hereinafter referred to as “ESI Group”, the “Company” or the “Parent Company”. The Company
and all its affiliated companies are hereinafter referred to as the “Group”, “ESI Group” or “ESI”.
Founded in 1973, ESI Group envisions a world where Industry
commits to bold outcomes, addressing high stakes concerns –
environmental impact, safety & comfort for consumers and
workers, adaptable and sustainable business models.
ESI is a pioneer in virtual prototyping solutions, providing software
solutions to solve critical and complex simulation problems at scale.
Our virtual prototyping software accurately replicates product
development, testing, and manufacturing with virtual simulations,
across Automotive, Aerospace, Energy and Heavy Industry , helping
our clients save valuable time, resources, and money by avoiding
costly and limited physical testing. ESI is present in more than
20 countries, employs nearly 1,000 people globally and reported
2022 sales of €130 million, at constant perimeter.
ESI is headquartered in France and is listed on compartment B of
Euronext Paris.
1.1.
ACTIVITIES, STRATEGY AND MARKETS
1.1.1. Main activities
ESI’s core strategic vision is to be a leading software partner in
selected virtual test markets, leveraging its predictive physics IP and
platform for chaining enabling clean, safe and productive industry.
ESI’s business model is based on software licensing with selected
consulting services. Its software enables reliable and predictive
simulation of the performance of products and industrial assets, the
identification of optimum manufacturing processes, the use of
immersive virtual reality to experience early-on the products and
the development of solutions for real-time monitoring of product
ageing during use. At all these stages, ESI’s solutions help its
customers to: accelerate their time to market, to lower their
operational costs, to reduce their risk and improve their product's
quality and to reduce their environmental footprint.
All risks related to ESI’s activities are listed, prioritized and identified
in the Chapter 3.
1.1.1.1.
Software Editor/Distributor
(Licensing activity)
Licenses business is the Group’s main activity, accounting for 85%
of revenue in 2022. Software is marketed in the form of proprietary
user licenses based for the most part on an annual contracting
system that, by nature, generates highly recurring revenue.
The significant added value of ESI’s solutions mobilizes the unique
expertise of its technical teams in multi-physics, multi-materials and
complex simulation methodologies. ESI Group’s approach requires
research and development work carried out by the Group’s
Research teams in situ or as part of a partnership.
Software solutions are distributed worldwide. In 2022, direct sales
managed 92.3% of license sales, the rest being entrusted to a
network of third-party distributors and agents. The two distribution
networks – direct and indirect – are complementary.
The Licensing activity may be broken down as follows:
■By contract type:
▪Rental license – user license contract renewable annually and
including maintenance services; this type of contract is
predominant,
▪Maintenance contract – maintenance includes updates and
technical support applicable as of the second year of a
perpetual
license
contract.
As
of
the
second
year,
maintenance revenue is recognized as software (maintenance)
revenue,
▪Paid-up license – long term license contract (paid-up licenses
for the duration of legal protection) including maintenance
services for renewable one-year periods (also named
Perpetual);
■Or, according to criteria concerning new client purchases:
▪“Repeat Business” includes contracts renewed by customers
from one year to the next, as well as additional features
purchased for software already installed in the system of an
existing client,
▪“New Business” comprises new customers and new products
purchased by existing clients.
1
THE GROUP
ACTIVITIES, STRATEGY AND MARKETS
6
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
Licenses
New Business
Repeat Business
Perpetual (paid-up)
Maintenance
Annual (rental)
Add-on
New customers
New products
Renewal products
CONTENTS
Aligning with the industry best practices, the Group assesses its
performance with the key performance indicator (KPI): Annual
Recurring Revenue (ARR). The definition of this indicator is: all
revenues from license sales (including maintenance services)
excluding revenues from perpetual licenses and before changes in
deferred revenues.. In 2022, the ARR of the Group, at constant
perimeter, amounted to 100.6 m euro, an ARR rate (all revenues
from license sales (including maintenance services) excluding
revenues from perpetual licenses and before changes in deferred
revenues divided by our total licenses revenue number, before
deferred) of 91.3%. The indicator "constant perimeter" is defined
part 5.1.2,2. of this document.
The Group’s approach is based on building close and long-lasting
relationships which meet the specific needs of customers looking to
successfully incorporate Virtual Prototyping into various industries
(for example with Renault-Nissan, Volkswagen, or Honda in the
Automotive, Boeing or Safran in the Aeronautics).
This approach drives the sustainability of ESI Group’s business
model visible in its Annual Recurring Revenue (ARR) performance
and its ability to renew its contracts with its customers.
1.1.1.2.
Consulting services
(Services activity)
In addition to its main business activity of software publishing and
distribution, the Group also provides consulting services directly
related to Virtual Prototyping.
The Services activity, which represents 14% of 2022 revenues,
includes consulting and other services.
Consulting covers the following three fields:
■Engineering studies: joint industrial projects carried out in
partnership with major industrial corporations with the aim of
promoting large-scale deployment of new applications with high
economic
potential
that
have
already
been
proven
technologically viable. The Group invoices its partners for the
cost of its services, but funds its own software development
work. As a result, it retains the intellectual property rights to the
software products developed or modified;
■Field Services: support services in conjunction with Licenses
activity (on- and off-site training and technical assistance);
■Contracting: specific studies, in particular application tests
(design verification and virtual performance testing of industrial
products). These services are generally invoiced based on the
time worked (lump sum or actual time spent) except for online
support services which may be provided as part of the support
services included with the annual license for the use of software
packages.
Note: Special projects are no more included in the revenues and
have been reclassified as a reduction in research and development
expenses. Correspondingly, costs incurred in connection with “Co-
financed projects” have been reclassified from cost of sales to R&D
expenses (please refer to 4.1 of Note to Consolidated accounts).
1.1.2. Main markets
1.1.2.1.
The Simulation & Analysis market
/ Market characteristics
ESI’s activity falls within the context of a major digitization of the
industry. Part of this trend, the Product Lifecycle Management (PLM)
sector is playing a key role.
CIMdata describes the S&A (Simulation & Analysis) segment as
follows: Simulation & Analysis includes a wide range of
0D/1D/2D/3D technologies such as structural and fatigue analysis,
thermal analysis, dynamics, acoustics, multi-body simulation,
computational fluid dynamics, materials characterization, systems
modeling and simulation, design optimization/DoE/robust design,
simulation results visualization, empirical data analytics, general
math-based calculations, simulation process and data management,
and others designed to enable engineers to simulate real world
functional behavior via digital modeling and simulations to perform
“what-if” scenarios, explore and evaluate alternative design and
technology concepts, and gain deeper insight into system behavior
during new product development; perform final performance
validation of the “as built” product as well as to optimize the
performance of products and systems in real world operations (e.g.,
supporting digital twins).
The S&A segment, star of the PLM market for the last several years
is expected be one of the more rapidly growing segments within the
tools sector of PLM over the next five years ($13 billion in 2026 –
CAGR 10.2%).
Global product development & Manufacturing trends are making
simulation indispensable. It is the only way to enable the efficient
development of complex systems that combine software and real
industrial assets.
ESI’s solutions bring a considerable and fundamental improvement
in the decision-making process by allowing the physical properties
and behaviour of the materials to be realistically taken into account
in the digital model. Going beyond the CAD (computer-aided design)
phase of the PLM model, ESI Group’s CAE (computer-aided
engineering) solutions allow complete control over the performance
of products during their entire lifecycle..
/ A market in strong consolidation
Each calendar year there are a number of mergers and acquisitions
(M&A) in the PLM economy and 2022 was not an exception as per
CIMdata. There were 190 acquisitions of note during the year, up
over the 104 tracked in 2020. Simulation and Analysis (S&A)
providers continued to acquire more physics to build out their
multiphysics capabilities:
THE GROUP
1
ACTIVITIES, STRATEGY AND MARKETS
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
7
Services
Consulting
Others
CONTENTS
1
2
3
4
5
6
7
8
9
■Altair Engineering made three acquisitions, including Flow
Simulator, a flow and heat transfer analysis technology spun out
from GE Avionics; S-FRAME Software, a structural analysis
software platform that marks their formal move into the
Architecture, Engineering, Construction market; and World
Programming, a UK-based data analytics specialist;
■Ansys added added two companies: Phoenix Integration, a
leader in model based systems engineering (MBSE) and multi-
disciplinary analysis and optimization (MDAO) and Zemax LLC, a
provider of optical imaging system simulation;
■Gamma Technologies acquired Exothermia, producers of
predictive thermo-electro-chemical solutions for zero-impact
emissions technologies.
/ ESI, in the heart of a competitive market
The complexity of the problems addressed by the Group, its long-
standing
experience
working
closely
with
major
industrial
corporations,
its
significant
investment
in
research
and
development, and the wide range of solutions it offers make it
difficult for any newcomers to enter its market.
In particular, the specialized fields in which ESI Group works require
an understanding not only of structured geometric data (digital
modeling) provided by CFAO/CIAO, but also of the physical
phenomena involved in simulation testing in order to make virtual
models “realistic”.
ESI’s technologies draw on:
■Its predictive physics IP;
■Its capability to chain the different physics and solutions in order
to offer a differentiating value to its customers;
■Highly skilled teams of researchers, whose specialized expertise
and reputation in the field of physical simulation are known.
Today, we cannot exclude, a priori, the arrival, as competitors in
ESI’s sector of intervention, of larger companies with greater
resources.
Given the considerable technical barriers that protect the Group’s
business, the arrival of new competitors could, in any event, only
take place in the context of a consolidation movement affecting the
sector. It would then be difficult for a new player in the sector to
rapidly build up, through company takeovers, a range of physical
simulation products as rich as that offered by ESI Group, and
offering the same predictive qualities recognized by major clients.
/ Long-term perspectives anchored
on three pillars
Like never before Industry is adopting digital practices, moving large
part of processes and decisions to virtual. ESI envisions a world with
inspiring improvements in clean, safe and productive industry. To
get there, everything should be simulated, exploring alternatives
sooner and involving a diverse cast of stakeholders in all decisions.
To go beyond virtual testing, ESI Group software solutions anchored
on three pillars:
■Predictive:
• Validates the product as manufactured, chains physics,
processes, and integrates with the customers' digital thread;
■Real-time:
• Model Order Reduction & Hybrid Twin are transforming the
virtual prototype into a Real-time Decision-Making tool;
■Immersive:
• Virtually conceived products or processes need to be tested
from a human-centric perspective;
• An Industrial Metaverse for efficient virtual collaboration and
decision making.
1.1.2.2.
Geographic areas
Geographic areas are based on the economic breakdown of the
Company:
■Europe, Middle East and Africa;
■Asia-Pacific;
■Americas.
2022
(Jan. 1 – Dec. 31)
2021
(Jan. 1 – Dec. 31)
2020
(Jan. 1 – Dec. 31)
Revenues
(In € thousands)
(In % of the total)
(In € thousands)
(In % of the total)
(In € thousands)
(In % of the total)
Europe, Middle East and Africa
62,148
46.4%
61,860
46.7%
58,809
45.7%
Asia-Pacific
49,653
37.1%
49,716
37.5%
50,109
39.0%
Americas
22,116
16.5%
21,003
15.8%
19,635
15.3%
TOTAL
133,918
100.0%
132,578
100.0%
128,553
100.0%
Figures are at constant perimeter.
2020 and 2021 Revenues have been restated, please refer to Note 4.1 to Consolidated Accounts.
As in previous years, the Group maintained a strong international presence, with 87% of revenue generated outside France.
1
THE GROUP
ACTIVITIES, STRATEGY AND MARKETS
8
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
1.1.3. Core strategic vision
In October 2021, ESI Group announced a three-year strategic plan
named “OneESI 2024 – Focus to Grow”. To increase its performance
both in term of revenue and in term of profitability, the Group built
a self-help plan founded on the focus of its teams on core activities.
To help in this focus exercise, the Group unveiled a new Core
Strategic Vision: “Being a leading software partner in selected virtual
test markets, leveraging its predictive physics IP and platform for
chaining to enable clean, safe and productive industry.”
1.1.3.1.
A software partner for industry
The industrial market is deeply changing while new challenges
appear
for
its
players.
Draconian
regulations,
disruptive
technologies (Artificial Intelligence, Big Data, Internet of Things…),
strong competition, shorten time to market, constrain industrial
players to be more demanding in terms of quality, reliability, safety,
production deadlines, and by the need to embrace environmentally
friendly manufacturing and production processes.
Well-aware of these challenges, ESI, as a leading software partner in
selected
Virtual
Test
markets,
empowers
industrials
with
technological solutions that enable them to rely on simulation to
accelerate, innovate, optimize and perform at another level.
Virtual reality technologies and Cloud/Saas availability significantly
increase the collaborative potential of ESI’s solutions, while
drastically reducing acquisition and ownership costs for companies.
By leveraging technologies such as Big Data, system modeling,
machine learning, and the Internet of Things (IOT), ESI’s solutions
can be integrated into an interactive, immersive, virtual decision-
making space in real time.
ESI’s solutions enable industry players to achieve their performance
and productivity objectives. More specifically, the Group’s know-how
enables its customers to meet the challenges of product pre-
certification, digitization of production lines, use of an operator-
centric approach, or predictability of product behavior and ageing,
even before design or upstream of decision-making represented
through its Hybrid Twin concept.
1.1.3.2.
Selected virtual test markets
Focused on its customers’ needs, ESI has organized its solutions
by industry, prioritizing the four industrial sectors presented below:
/ The “Automotive & Land Transportation”
industry
ESI has been supporting the automotive industry through its major
digital transformations since the 1980s, notably with the invention
of the virtual crash test carried out with a consortium of German car
manufacturers in 1985.
In the race to bring electric, autonomous and connected vehicles to
market, OEMs face a real challenge: to maintain profitability and
growth, they must increase the efficiency of the existing
transportation paradigm while accelerating the time-to-market of
their new-generation concepts. Advanced simulation technologies
are already widely used in the industry. However, tasks to process
are still very complex to the point that more freedom and certainty
in vehicle development have become a competitive advantage.
ESI supports players in this industry to help them:
■Design, manufacture and assemble future mobility vehicles;
■Meet their performance and quality goals with ever-shorter
production deadlines;
■Guarantee passenger safety and comfort of and reducing vehicle
operation and maintenance costs.
Main
customers:
Alstom
Transport,
Daimler,
FAW
Group
Corporation, Ford Motor Company, General Motors, Gestamp
Group, Honda, HKMC, Mercedes-Benz, Stellantis, Renault-Nissan,
Shanghai Automotive Industry Corporation, TATA Group, Toyota,
TRW Automotive, Volkswagen Group, Faurecia, Volvo Group,
Benteler, ZF, and Yanfeng.
/ The “Aerospace” industry
Over the past decade, aeronautical manufacturers had to face ramp
up challenge, doubling in few years the production rate for the best-
seller narrow-body aircraft segment. Although a deep digital
transformation have been engaged, achieving such ramp up was
achieved with an incremental approach mixing traditional legacy
with new paradigm. Covid pandemic had a strong impact on the
overall ecosystem, almost stopping flight, production, even
engineering activity with a significant amount of cancellation
dropping down the OEM backlog. Digital transformation did
however not stop. OEM and their supply chain has benefited from
the production downtime to refine their strategy and speed-up the
implementation of smart manufacturing and digital mindset.
Industry bounce back natively goes for digital. In addition,
sustainability and climate neutrality become more than ever an
urgent matter that speed-up the engagement of several new
programs as it had never been the case in the past. ESI value
proposal is key to enable and support aerospace industry for this
new journey.
Main customers: Airbus Group, Boeing, Bombardier, Embraer,
BAE, Rolls-Royce, Safran, Raytheon Technologies (Pratt & Whitney),
General Electric, Honeywell, AECC, PCC, ALCOA, NASA, Northrop
Grumman, Bell Flight, Joby, Lilium.
/ The Heavy Industry
From construction machinery to forestry machinery, agricultural
machinery, lifting and handling equipment and mining machinery,
including the supply chain of primary metals and parts,
manufacturers of industrial machinery face many challenges related
not only to the design but also to the manufacturing and operations
of their products. Their goal is to provide safer, greener, and more
productive machines, controlling costs and lead times through
effective collaborative processes. ESI’s solutions for engineering and
manufacturing simulation covers well the needs related to this
industry, while committing to performance levels over the lifetime of
their products, even under the harshest operating conditions.
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For this sector, ESI works with its customers to help them:
■Guarantee the safety and productivity of human source
operations during manufacturing and maintenance operations;
■Design safe, clean and efficient products aimed for the toughest
conditions;
■Support the journey towards zero manufacturing defects and
zero interruption of operations.
Main customers: Arcelor Mittal, Baker Hughes, Caterpillar,
Cummins, John Deere, Kion Group, Komatsu, Nippon Steel,
Sumitomo, ThyssenKrupp.
/ The “Energy” industry
ESI’s customers in the energy and power sector face a number of
evolving challenges, ranging from resolving safety, environmental
and
sustainability
issues
to
managing
financial
risks
and
strengthening technical requirements. Manufacturers must comply
with increasingly complex regulatory requirements while improving
operational efficiency. Solving these issues requires ad-hoc
technical modeling methodologies that must accurately address
operational and accidental events applicable to generation and
transmission facilities. Therefore, effective realistic modeling is
essential to remain competitive and requires a high level of
innovation.
In this sector, ESI supports its customers to help them:
■Ensure optimal operations of new facilities while controlling
costs and complying with safety standards;
■Manage profitability and plan the extension of the life cycle of
operational installations;
■Control dismantling costs.
Main customers: EDF, Framatome, GDF, General Electric, Japan
Atomic Energy Agency, Samsung, Siemens.
In 2022, orders in the four main industrial sectors above represented about 93% of software revenues (before deferred), and broke down as
follows:
1.1.3.3.
Company differentiators
Focused on its customers’ needs, ESI has organized its solutions
by industry, prioritizing its differentiators:
■Predictive physics IP to give the Group’s customers the
confidence to replace a physical test with a virtual test;
■Platform for chaining: ESI’s differentiated capability to chain
allowing the Company to give its customers the ability to connect
previously siloed elements on the simulation workflow brought
to life by a common user interface.
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Automotive &
Land transportation
63.8%
Aerospace,
Defense & Naval
11.8%
Energy
3.7%
Heavy Industry
11.6%
Others
9.1%
CONTENTS
1.1.4. A focused multi-horizon offer
As part of its three-year plan, ESI is reshaping its offerings and
innovation by focusing and investing on its core business.
/ Focus on the core
The core strategic vision is helping the Group focus. It helped clarify
its core solutions and technologies. It will help ESI to invest
significantly in the most important and to reduce investment in
what is less important. It also implied end of life decisions for some
products where the Group is not in a position to win. At the same
time, the Group decided to open much more to the ecosystem and
partners to complete and strengthen its offering.
An offering divided into three main business lines:
■Product
Performance
Simulation:
enables
gains
in
performance and productivity. Thanks to predictive models and
process
automation,
industrialists
can
meet
certification
requirements and other validation needs without relying on
physical tests.
Product performance addresses the virtual test & validation of
the performance of the product, like crash and safety, NVH
(standing for Noise, Vibration, and Harshness), acoustics, and
system performance. The total addressable market for the
product performance business line is $1.5B. This includes ESI’s
flagship VPS software. In the next few years, the Groups expects
to increase its market share by improving the UX, integrating
better with the PLM and addressing new use cases, and winning
additional OEM ecosystems. Indeed, as new safety certification
regulations are emerging, ESI is in a very good position to
respond to those extended market requirements. The Product
Performance business line also includes Acoustics Performance
and System Engineering. This is a large market where ESI
chooses to focus on specific use cases where it has a clear
differentiator;
■Simulation of Smart Manufacturing processes: establishes
the right manufacturing processes to meet performance
indicators for both industrial products (for instance reducing
weight) and for associated processes (for example controlling
distortions or reducing waste).
The ESI Smart Manufacturing Business Line covers the Virtual
Manufacturing Process Chain. This market is large (TAM
estimated at $1.2B). Automotive is ESI’s main short-term focus as
the industry is under great pressure to adopt the digitalization of
manufacturing. Common usage of simulation for manufacturing
is often siloed to a single process. ESI has such point solutions
for sheet metal forming, casting, and composites. Ongoing ESI
priority activities include the chaining of single product
manufacturing simulation with joining and assembly processes.
This activity completes the bridging of performance simulation to
validate the product “as manufactured” to enable improved
concurrent engineering. This holistic approach aims to secure an
early and reliable assessment of the manufacturing quality of the
assembled product leading to massive gains in physical
prototypes reduction, time-to-market, waste reduction, or even
recalls;
■Simulation of Human Workflows: allows customers to
implement an operator centric approach to ensure the efficiency
and safety of assembly and maintenance operations.
The ESI Human Centric Business Line provides solutions in the
context of the industrial extended reality software solution
market segment. This industry XR market is similar in size to the
virtual manufacturing market (TAM estimated at +$1.2B) and is
expected to grow well above 20% (5-year CAGR). In this market,
the ESI activities are primarily focused on Digital Manufacturing
workflows for VR Enabled Assembly Line Exploration, Validation,
and Commissioning.
/ Invest to win
R&D investments
As introduced before, the objective of ESI Group’s with its “OneESI
2024 – Focus to Grow” is to focus on its core. It doesn’t imply to
stop investing. On the opposite, thanks to its core strategic vision,
the Group identified activities not aligned with its core and
redeployed these investments to better invest to win, to outpace
the competition in a selected market.
Part of its plan, the Group announced a redeployment of a
significant portion of its R&D investment to more valuable growth
opportunities. These actions will allow the Group to accelerate the
delivery of software to the customers in its core markets.
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Research & Innovation
The Group is prioritizing its mid-term innovation on investments on
its core Hybrid Twin concept (enriching the existing knowledge
consolidated in its simulation tools with data and Artificial
Intelligence), in particular related to manufacturing problems
(industry
4.0,
to
reduce
scrap,
energy
usage,
predictive
maintenance) and Asset Health monitoring (reduce maintenance,
warranty and operational cost), and design space exploration (in
crash worthiness for example). The value for the customer is to
continuously becoming safer, cleaner, and more productive.
The Group’s positioning is in progress with its world class research
& innovation team and will involve partnerships and the
development of ecosystems.
To ensure constant innovation, ESI also establishes partnerships
with several first-rate universities, technological institutes and
leading colleges, in many countries where the Group does business.
The purpose of these collaborations is to share experiences and
explore new technologies, encouraging young people to work in the
industrial sector, training the finest employees of tomorrow, and
foster innovation in education.
In 2019, Professor Francisco Chinesta, Professor and Researcher at
the École Nationale Supérieure des Arts et Métiers (ENSAM) and Chief
Scientist and Chairman of the Scientific Committee of ESI, received
the Silver Medal of the French National Centre for Scientific
Research (CNRS) for his contribution to the Center’s outreach and
the advancement of research.
1.1.5. Research and development (R&D) policy
The R&D policy is applied at different levels depending on the
maturity of the technologies and the target market:
■In close collaboration with customers and users for existing
products
to
ensure
product
maintenance,
integrate
improvements and enhance functionalities to meet the
expectations of the installed base and to gain new customers;
■By industrializing technical and hardware innovations, or
innovation in usage modes (model reduction, new generations
of processors, Cloud, etc.) in order to deliver new products that
meet a confirmed market need and to ensure faster adoption of
these products in an industrial environment;
■Through research contracts with industrial, academic and
institutional partners (academic chairs, European projects, co-
creation projects) in order to demonstrate the viability of new
technologies or the relevance of solutions in new application
areas or to meet new industrial requirements.
ESI Products and Technology organization prioritizes these
investments based on market opportunity. On the most advanced
innovation topics, ESI reduces risks through co-financing and the
research tax credit in France (CIR).
In addition, the teams adopt a dual specific/generic approach to
meet these different objectives:
■Ensure the “genericity” of the product and its components to
cover multiple needs in multiple industrial segments;
■Maximize synergies between products to facilitate the release of
new competitive and economical versions and minimize
maintenance efforts;
■Ensure product competitiveness and productivity by targeting
specific high-potential business applications and solutions.
For more information, see also section 5.1.3.
1.1.6. Ecosystem
Since the foundation of the Company, ESI Group developed strong
partnerships with the academic ecosystem. This strategy was not
applied similarly with the Simulation & Analysis ecosystem. The
industry’s needs evolved. All the different industrial players are now
tightening their supply chain and are looking for global solutions
with streamlined processes. Their suppliers need to develop
interoperable systems and solutions helping them to accelerate
their development and to reduce their costs.
Aware of this trend, ESI Group integrated in its strategic plan the
clear objective to develop strategic partnerships with its ecosystem
in order to bring an integrated value proposition to its customers.
As an example, the Group developed a partnership with PTC aiming
to connect ESI IC.IDO software to PTC Windchill PLM platform. The
first industrialized version of this higher value offer was released by
ESI in Q4 2022.
The Group develops partnerships with hardware suppliers, software
solution providers, leading industrial companies, and technological
and academic institutes alike.
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CONTENTS
1.2.
HISTORY OF THE GROUP
1973 to 1990
In 1973, Alain de Rouvray, Jacques Dubois, Iraj Farhoomand and Eberhard Haug, created ESI (Engineering System
International). The Company initially operated as a consulting company for European defense, aerospace, and
nuclear industries. In 1979, the Company opened a subsidiary in Germany.
In 1985, ESI carried out the first successful digital crash test simulation for a German consortium led by Volkswagen.
This marked the start of development of its flagship software package, PAM-CRASH.
1991 to 1999
In 1991, ESI became ESI Group and raised venture capital to enter the field of software edition. The Company set up
subsidiaries in the United States, Japan, and South Korea. In 1997, it took over Framasoft (digital and mechanical
simulation for the nuclear industry), followed by Dynamic Software (stamping simulation) in 1999.
2000 to 2010
In July 2000, ESI Group launched an IPO, raising some €30 million.
From 2000 to 2008, ESI Group pursued a concerted external growth strategy, successively acquiring Mecas,
strengthening its distribution network in Eastern Europe, STRACO (Vibro-Acoustic market), VASci (Vibro-Acoustic
Sciences for noise and acoustic comfort simulation), ProCAST and Calcom (foundry and metallurgy simulation), the
Product Division of CFD Research Corporation (fluid dynamics), the Service business of IPS International (virtual
human models), ATE Technology International Ltd. (sector diversification in China), the Vdot software platform
(product development process management), and finally Mindware Engineering Inc. (fluid dynamics sector).
Meanwhile, ESI Group strengthened its international presence by opening subsidiaries in England, India, China, Italy,
Brazil, and Tunisia.
2011 to 2018
In 2011, ESI Group acquired the company IC.IDO, or “I see, I do” (immersive virtual reality solutions), followed by Efield
AB (virtual simulation of electromagnetic phenomena). The following year, ESI Group took over OpenCFD Ltd (leader
in open-source fluid dynamics software) from SGI, thereby taking ownership of the OpenFOAM® brand.
In 2013, ESI Group signed a joint venture agreement with AVIC-BIAM to collectively operate the new company “AVIC-
ESI (Beijing) Technology Co. Ltd” (effective as of February 1, 2014), and subsequently acquired CyDesign Labs Inc.
(system modeling).
In 2015, ESI Group carried out the following acquisitions: CIVITEC (virtual simulation of automated driver assistance –
ADAS), the business assets of PicViz Labs (Big data-based predictive analysis), the technology assets of Ciespace
(Cloud/SaaS offering), and the Presto software platform (electronics cooling market).
In 2016, ESI Group continued to extend its strategic positioning by acquiring ITI GmbH (realistic simulation of
mechatronic and multi-domain systems) and Mineset Inc. (Big data visual analytics and machine learning).
In early 2017, ESI Group took over Scilab Enterprises, publisher of the Scilab open source analytical calculation
software.
These numerous acquisitions have allowed ESI Group to enrich its solution portfolio, putting forth a comprehensive
offering suited to the needs of industrial players.
2019
The Group has been through a major change in its governance on February 1, 2019 with the nomination of Cristel de
Rouvray as Chief Executive Officer of the Group while Alain de Rouvray remained non-executive Chairman of the
Board of Directors.
ESI continues its transformation journey with, in particular, its commercial focus and resource allocation plan,
announced in April 2019, aiming to develop specific industrial strategies by close cooperation with customers.
2021
2021 was marked by two major evolutions for the Group on both the governance and strategy front.
The governance:
As part of the evolution of its governance, ESI Board appointed Alex Davern as Chairman of the Board of Directors,
effective February 8, 2021, along other changes in the organization of the Board. Patrice Soudan joined the board in
September and Alain de Rouvray resigned in December 2021.
The strategy:
In October, ESI Group unveiled for the first time publicly a tree-year strategic plan “OneESI 2024 – Focus to Grow”
including mid-term forward-looking statement both for its revenue and its profitability.
2022
Beginning of the execution of the “OneESI 2024 – Focus to Grow” plan.
ESI Group divested of the following products and technologies: ACE+ (acquired from CFD Research Corporation
before 2010), Scilab (acquired in 2017), Inendi Inspector (acquired in 2015 from PicViz Labs).
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1.3.
GROUP ORGANIZATION
1.3.1. Operational flowchart
As of the date of this Universal Registration Document, the Group’s operational flowchart was as follows:
1.3.2. Legal flowchart
As of the date of this Universal Registration Document, the Group’s legal flowchart was as follows:
Note: the percentages of equity and voting rights are identical.
For more information, see note F.8 “Table of controlled entities and affiliates” (at December 31, 2022) in the notes to the consolidated financial statements.
1
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ESI Group
GENERAL MANAGEMENT
Product &
Technology
Revenue
Generation
Marketing &
Operations
Enabling
Functions
99%
100%
% of holding
In dissolution
process
ESI Services
Vietnam Co., Ltd.
Vietnam
(100%)
ESI Software (India)
Private Ltd.
India
(100%)
ESI North America, Inc.
United States
(100%)
100%
ESI Japan, Ltd.
Japan
(100%)
ESI Group
Beijing Co., Ltd.
China
(100%)
ESI South America
Comercio E Servicos
De Informatica Ltda
Brazil
(100%)
Hankook ESI Co., Ltd.
South Korea
(100%)
AECC-ESI (Beijing)
Technology Co., Ltd.
China
(35%)
Calcom ESI SA
Switzerland
(99%)
( )
% of control
100%
100% 35%
100%
100%
100%
EMEA
ASIA-PACIFIC
AMERICAS
ESI GROUP SA
OpenCFD Ltd.
United Kingdom
(100%)
ESI UK Ltd.
United Kingdom
(100%)
100%
100%
Mecas ESI s.r.o.
Czech Republic
(100%)
ESI Group Hispania s.l.
Spain
(100%)
9.5%
51%
Engineering System
International SAS
France
(99.96%)
99.96%
90.5%
ESI Services
Tunisie SARL
Tunisia
(100%)
100%
ESI Italia s.r.l.
Italia
(100%)
100%
100%
100%
ESI Nordics AB
Sweden
(100%)
100%
ESI Germany
GmbH
Germany
(100%)
ESI US R&D, Inc.
United States
(100%)
49%
CONTENTS
1.4.
SELECTED INFORMATION
1.4.1. Financial information
All below information will concern “constant perimeter”, otherwise will be stated. Please refer to definition, Note 5.1.2.2. of the present document.
2022: ESI Group Achieves Key Milestones of OneESI 2024 Plan,
Delivering Strong Results in 2022
ESI Group has made significant progress on its strategic plan, on
track with expectations for the fiscal year 2022. The Group's ability
to consistently fulfil its long-term commitments was demonstrated
by a strong 7.4% increase in Annual Recurring Revenue (ARR)
(1),
reflecting a focus on recurring software revenue that was
prominently highlighted in the OneESI 2024 plan. The Group has
successfully raised its ARR to €100.6m (compared to €93.7m in
2021), marking a substantial advancement for the Group. In
addition, ESI Group has achieved its revenue objectives, with growth
consistent with the communicated range to the market (between
2% and 4%) for a total revenue of €129.7m. The Group's emphasis
on its licensing business has also paid off, as it now accounts for
85.0% of the company's overall activity (compared to 83.2% in
FY21).
ESI Group is pursuing its transformation by focusing on its core
activities and improving customer satisfaction. This focus is
reflected in the company's significant Annual Recurring Revenue
(ARR) growth, increased business wins, and strong employer brand,
which has helped attract talent in the market. Additionally, at
constant perimeter, ESI Group's revenue growth and cost-
management efforts resulted in an 11.6% Adjusted EBIT
(2) margin
(3)
(exceeding the anticipated range of 9% to 11%).
The company's strategic approach has yielded positive results, with
growth in our three regions particularly in the Americas, where it
grew by 15.9% (+4.2% cer), the Asia market remained stable at
-0.2% (+2.4% cer) due to the acceleration of the strategic shift from
perpetual to recurring licenses. The EMEA region posted a growth
of 1.6% (+1.3% cer). ESI Group's commitment to enhancing
customer satisfaction and attracting top talent has resulted in
enabling the company to position itself as a market leader in the
face of ongoing challenges.
The gross margin rate increased to 78.9% vs 76.8% in 2021 mainly
due to higher rate of licenses in our revenue mix. As announced,
the Group continued streamlining its operations and reduced its
headcount – from 1,145 (end of December 2021) to 985 (end of
December 2022). In the meantime, the Group recruited highly
seasoned leaders and team members for strategic positions across
the organization.
In 2022, Other operating income and expenses amounted to
€12.7m mainly due to CFD sale (During the fiscal year, the Group
generated profits from the sale of non-strategic assets (mainly
CFDs) for a total amount of 15.9 million euro.) versus -€27.6m in
2021 due to ESI Group restructuring and transforming plan
comprising of Provisions for reduction in headcount & Impairment
of intangibles as related to products & services deemed non-core.
In 2022, ESI Group continued demonstrating its capacity to improve
its financial situation. ESI Group controlled its costs thanks to a
better resource allocation and reduced its net financial debt
(4) (from
€12.5m in 2021 to -€7.3m in 2022) with more reimbursement of the
bank loans (€8.5m in 2022 vs €5.3m in 2021).
The Group has increased its cash position end-of-year from €30.3m
to €41.6m which includes the positive impact of the CFD business
sale (+€20m of cash) announced in July 2022 and the payment of
restructuring charges for the Group linked to its departure plan
(about €7m euros in 2022 versus €1.7m in 2021).
The gearing
(5) significantly improved from 17.2% in 2021 to -8.0% in
2022.
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(1)
Annual Recurring Revenue - all revenues from license sales (including maintenance services) excluding revenues from perpetual licenses and before changes in deferred
revenues.
(2)
Adjusted EBIT is a non-IFRS indicator based on EBIT (IFRS). Adjusted EBIT corresponds to EBIT before stock-based compensation expenses, restructuring charges,
Impairment of intangible assets, amortization of intangible assets related to acquisitions, Application of IFRS 16 (leases) and other non-recurring items (including net
gains and losses from disposals). For definitions of non-IFRS indicators, please refer to Note 5.1.2.2. of the present document.
(3)
Adjusted EBIT margin is a non-GAAP indicator margin corresponding to the Adjusted EBIT out of the Revenues.
(4)
Net financial debt: Gross financial debt minus cash and cash equivalents.
(5)
Gearing: Net financial debt/equity.
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Revenue evolution – at constant perimeter
(In € millions)
________
(a)
Constant exchange rate.
Adjusted EBIT
(a) – at perimeter
(In € millions and % of revenue)
________
(a)
Adjusted EBIT is a non-IFRS indicator based on EBIT (IFRS). Adjusted EBIT
corresponds
to
EBIT
before
stock-based
compensation
expenses,
Restructuring charges, Impairment of intangible assets, Amortization of
intangible assets related to acquisitions or disposals, Application of IFRS 16
(leases) and Other non-recurring items (including net gains and losses from
disposals).
(b)
Constant exchange rate.
Geographical revenue breakdown – at constant perimeter
________
Focus on Licenses revenue – at constant perimeter
________
(In € millions)
2022
(Jan 1 – Dec 31)
2021
(Jan 1 –Dec 31)
Change
Change Constant
Exchange Rate
(cer)
Revenue
129.7
126.0
3.6%
2.1%
Licenses
110.3
104.8
5.3%
4.3%
Annual Recurring Revenue (ARR)
100.6
93.7
7.4%
6.5%
PUL (Perpetual Licenses)
9.7
11.4
(15.2%)
(17.0%)
Deferred revenue
—
(0.3)
(89.9%)
(105.7%)
Services
19.4
21.2
(8.4%)
(8.7%)
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Licenses
Services
2021
2022
126.0
129.7
+2.1% cer (a)
+3%
104.8
21.2
110.3
19.4
2021
2022
8.6
15.0
+81.8% cer (b)
+75.1%
6.8%
11.6%
Europe,
Middle East
and Africa
46.6%
(vs. 48.1%)
Americas
16.2%
(vs. 15.5%)
Asia-Pacific
37.3%
(vs. 36.4%)
CONTENTS
1.4.2. Extra-financial information
Refer to chapter 4 for more detailed information.
CSR strategy
In 2022, ESI worked on the alignment of its CSR strategy with the “OneESI 2024 – Focus to Grow” plan to improve its growth, profitability and
sustainability for the benefit of all stakeholders.
We defined 4 corporate objectives which are embedded in the four axes of the CSR strategy:
CSR pillars
Objectives by 2024
2022
2021
2020
2019
1. Being a Committed
Employer
Reach 25% of women within the Group
21.8 %
21.9 %
22.1 %
22.2 %
2. Being an outstanding
partner
75% of success stories mention positive
impact on planet, human and industry
performance
80 %
74 %
21 %
13.0 %
3. Being an Ethical &
Committed Company
Reach an average burn rate
a of 1% over
3 years (based on LTI plans)
0.92 %
0.62 %
0.50 %
0.54 %
4. Being an Environmentally
friendly player
Reduction of our GHG emissions
b by
25% due to the implementation of New
ways of Working (NWoW)
51.35%
(293 T GHG)
57.22%
(257 T GHG)
57.25%
(257,5 T GHG)
n/a
(601 T GHG)
(a) Burn rate (or run rate) refers to the dilution represented by the total number of options and restricted shares granted by the company in a given period. One-year burn
rates are calculated by dividing the number of options and restricted shares granted in a year by the total number of common shares outstanding.
(b) GHG emissions: Sum of GHG due to electricity + GHG due to transport + GHG due to company cars.
2022 has been marked by 2 main initiatives to support women in the workplace, and specifically in the technology sector:
■ESI created an internal network “women@ESI” charged to set off multiple initiatives to ensure inclusion and gender equality;
■ESI joined the WEP established by UN Global Compact and UN Women.
Taxonomy
ESI is convinced of the environmental benefits of virtual prototyping
and its role in the overall reduction of greenhouse gas emissions
through the benefits of its solutions such as:
a. Replacement of physical prototypes;
b. Optimization of product performance and durability;
c. Lightening of products in order to reduce the resources
required for their use;
d. Improvement of manufacturing processes to reduce errors and
waste generated, as well as the volume of materials required.
The Group’s activity is considered an "enabling activity" because it
has the potential to enable manufacturers to improve their own
sustainability approach in the design-production phase of their
products. Therefore, the eligible turnover is 100% to the climate
objectives of the European Taxonomy.
ESI has identified categories of capital expenditures and operating
expenses relevant to the Taxonomy.
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CAPEX
ESI Group has identified two categories of
capital expenditure relevant to the
Taxonomy:
•
6.5: Transport by motorbikes, passenger
cars and light commercial vehicles
•
7.7: Acquisition and ownership of
buildings
OPEX
ESI Group has identified three categories of
operating expenses relevant to the Taxonomy:
•
7.7: Acquisition and ownership of buildings
•
8.1: Data processing, hosting and related
activities
•
8.2: Data-driven solutions to reduce GHG
emissions
REVENUES
All of ESI Group's revenues can be
included in the activity:
•
8.2: Data-driven solutions to reduce
GHG emissions
100 %
GROUP
REVENUE
ELIGIBLE
30 %
OPEX
ELIGIBLE
34 %
CAPEX
ELIGIBLE
CONTENTS
1
2
3
4
5
6
7
8
9
18
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
IN BRIEF
CHAPTER 2
MEMBERSHIP OF THE
BOARD OF DIRECTORS
3
BOARD OF
DIRECTORS’ COMMITTEES
ATTENDANCE RATE
Strategic Committee
Audit Committee
Compensation, Nomination
& Governance/CSR Committee
100%
92%
100%
KEY FIGURES
85.7%
independent
members (a) (b)
60.6 years
average age (a)
42.9%
of women (a) (c)
57.1%
of diversity (a) (d)
(a) At the date of this Universal Registration Document, excluding the Board Observer.
(b) At the date of this Universal Registration Document and in accordance with the recommendation R.3 of the Middlenext Code which recommends that
the Board include at least two independent Directors and sets the independence criteria.
(c) In accordance with the Article L.22-10-3 of the French Commercial code.
(d) Board members/Directors who are foreign nationals, at the date of this Universal Registration Document.
Véronique
JACQ
Charles-Helen
DES ISNARDS
Patrice
SOUDAN
Rajani
RAMANATHAN
Cristel
DE ROUVRAY
Alex
DAVERN
Chairman
7
DIRECTORS
+ 1 OBSERVER
INCLUDING 3 WOMEN
AND 6 INDEPENDENT
MEMBERS
Éric
D’HOTELANS
Yves
DE BALMANN
Attendance rate: 98%
2
REPORT ON
CORPORATE
GOVERNANCE
2.1.
GOVERNANCE CODE
20
2.2.
FUNCTIONING OF THE GENERAL MANAGEMENT
21
2.2.1.
Chief Executive Officer
21
2.2.2.
Limits on the powers of the Chief Executive Officer
21
2.2.3.
Leadership Team (ELT)
22
2.3.
BOARD OF DIRECTORS
22
2.3.1.
Composition of the Board of Directors
22
2.3.2.
Offices of Directors
26
2.3.3.
Operations of the Board of Directors
29
2.3.4.
Specialized committees
33
2.3.5.
Function of Observer
35
2.3.6.
Relationships with shareholders
36
2.4.
COMPENSATION PAID TO THE DIRECTORS
AND THE MANAGEMENT
36
2.4.1.
Compensation policy for corporate officers for 2023 financial year
36
2.4.2.
Compensation due to Directors for financial year
ended on December 31, 2022
41
2.4.3.
Compensation to the executive corporate officers
42
2.5.
ADDITIONAL INFORMATION IN RESPECT
OF CORPORATE GOVERNANCE
48
2.5.1.
Regulated agreements and commitments
and related party transactions
48
2.5.2.
Control of current agreements concluded under normal conditions
48
2.5.3.
Delegations of authority
49
2.5.4.
Provisions of the articles of association concerning the participation
of shareholders in General Meetings
50
2.5.5.
Factors that may have an impact in the event of a public offering
51
2.6.
STATUTORY AUDITOR’S REPORT ON REGULATED
AGREEMENTS
52
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
19
CONTENTS
This section constitutes the report of the Board of Directors on
corporate governance pursuant to Article L. 225-37 of the French
Commercial Code. This report notably sets out the conditions of
preparation and organization of the work of the Board of Directors
and its committees, the powers of the corporate officers, the
principles and rules adopted to define their remuneration and
benefits of any kind granted to them, as well as other information to
be included under Articles L. 225-37 et seq. and L. 22-10-3 et seq. of
the French Commercial Code.
This report has been prepared on the basis of work carried out by
various departments of the Company, in particular, the Legal
Department, Finance and Administration Department and Human
Resources Department.
This report was approved by the Board of Directors on February 27,
2023, after review and recommendation by the Board committees
of the sections under their respective responsibilities and sent to
the Statutory Auditors. It will be presented to the Combined
General Meeting of June 29, 2023.
2.1.
GOVERNANCE CODE
The Company is a limited company (société anonyme) with a Board
of Directors. The Directors, the Chairman of the Board and the Chief
Executive Officer (“CEO”) are referred to collectively in this Universal
Registration Document by the term “Corporate Officers”.
On the date of publication of this Universal Registration Document
and to the Company’s knowledge, there are:
■No family ties among the Company’s corporate officers);
■No conflict of interest between the private interests of each
corporate officers and their duties with regard to the Company;
■No arrangement or agreement concluded with the principal
shareholders or with clients, suppliers or others, as a result of
which any of the corporate officers would have been appointed
in such position;
■No restriction on the sale by corporate officers of their
shareholdings in the Company’s capital whereas there is no
shareholders’ agreement as described under section 8.2.5 of
this Universal Registration Document);
■No service agreement binding the corporate officers to the
Company or any of its subsidiaries that provides benefits to be
granted to them, apart from the regulated agreements as set
out under section 2.6 of this Universal Registration Document.
In addition, to the Company’s knowledge on the date of this
Universal Registration Document, no corporate officer has been in
the last five years:
■Convicted of fraudulent offences;
■Associated with any bankruptcies, receiverships or liquidations;
■Subject to any official public incrimination and/or sanctions by
statutory or regulatory authorities;
■Disqualified by a court from acting as a member of the
administrative, management or supervisory bodies of an issuer
or from acting in the management or conduct of the affairs of
any issuer.
During its Meeting of February 27, 2023, the Company confirmed it
voluntarily referred to the Middlenext Code, which is available on
the website www.middlenext.com as revised on September 2021.
As every year, the Board of Directors reviewed its compliance with
the recommendations, in particular the points of vigilance of the
Code. As part of the “Comply or Explain” rule provided in Article
L. 225-37-4 of the French Commercial Code, the Company
considers that its practices comply with recommendations of the
Code with the exception of the following recommendations for the
reasons given below:
Exceptions to the Middlenext Code
Explanations
R.7
Chairmanship
of
the
specialised
committees
entrusted to independent “members of the Board”,
except in very special cases for which reasons are
given.
In relation to the specific mission of the Strategic Committee, which is responsible for
reflecting on the Group's positioning and, in particular, analysing M&A opportunities,
its chairmanship by the Chief Executive Officer allows for a complete alignment
between strategy and the implementation of decisions. This is the only committee
chaired by a non-independent director
R.8
The Board of Directors has a specialized committee
on Corporate Social Responsibility (CSR) or meets
as a CSR committee, depending on its size.
Depending on the topics, this committee works in
conjunction with the others Board of Directors’
Committees.
As indicated in section 2.3.1.2 of this document, as of September 6, 2022, the
Compensation, Nomination and Governance/CSR Committee has been established
following the merger of the Compensation Committee with the Nomination and
Governance Committee/CSR, which already covered the consideration of social and
environmental issues in its recommendations to the Board for fiscal year 2021.
The Compensation, Nomination and Governance/CSR Committee is thus responsible
for monitoring the CSR approach in line with the Group's strategy, as explained in
section 2.3.4.3. which sets out the composition of the Committee, its tasks and the
frequency of its meetings during fiscal year 2022. The CSR strategy is presented in the
Chapter 4 of this document.
R.12
Presence condition for Directors’ remuneration
This criterion is applied to independent Directors but is not relevant for the non-
independent Director (CEO), who is always present because of her executive role within
the Company (see Directors’ compensation policy for 2023 under section 2.4.1.1).
R. 16
Definition and transparency of the compensation of
Corporate Officers
The code provides that in the case of variable compensation, the assessment of
performance achievement takes into account quantitative criteria - financial and non-
financial - as well as qualitative criteria. In the context of its transformation, the Board
of Directors has chosen to focus the remuneration of the Chief Executive Officer on
financial performance criteria in line with the objectives of the three-year strategic plan
communicated in October 2021, which refer to the growth and profitability of the
Company.
2
REPORT ON CORPORATE GOVERNANCE
GOVERNANCE CODE
20
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
2.2.
FUNCTIONING OF THE GENERAL MANAGEMENT
2.2.1. Chief Executive Officer
In accordance with the legal provisions and articles of association,
the Board of Directors decided on September 18, 2018 to separate
the functions of Chairman of the Board of Directors and Chief
Executive Officer (“CEO”): Cristel de Rouvray took function as CEO on
February 1, 2019.
The CEO is vested with the broadest powers to act in all
circumstances on behalf of the Company. The powers of the CEO
are however limited by the Board of Directors (see section 2.2.3.1
below).
In accordance with Article L. 225-54-1 of the French Commercial
Code, Cristel de Rouvray does not hold any other position as CEO in
a public limited company with its registered office in France.
No one can be appointed CEO if he is over 65 years old. If the
current CEO exceeds this age, he is deemed to have resigned from
office.
2.2.2. Limits on the powers of the Chief Executive Officer
The CEO represents the Company in its dealings with third parties.
He is vested with the broadest powers to act in all circumstances on
behalf of the Company, provided that the act he performs is part of
the corporate object and is not expressly reserved to Shareholders’
Meetings or to the Board of Directors.
Without prejudice to the legal provisions relating to authorizations
to be granted by the Board of Directors (regulated agreements,
sureties, endorsements and guarantees, transfers of participations
or real estate, etc.), the Chief Executive Officer must obtain the prior
authorization of the Board of Directors for the following operations
that are outside the scope of day-to-day management, in
accordance with its internal rules:
■Purchase or acquire, sell or dispose of, or mortgage any real
estate, pledge any movable property and claim, where the
transaction exceeds the amount of €100,000;
■Operations intended to consent to or contract any loans, credits
or advances, where these exceed an amount of €2,000,000;
■Direct operations or equity investments that may affect the
Group’s strategy and substantially modify its financial structure
or scope of business;
■Settle any dispute and take legal action, with the exception of
debt recovery actions or any day to day operations and urgent
actions such as provisional or conservatory measures;
■The issue of pledges, guarantees, endorsements or sureties
where these exceed an annual amount of €100,000;
■The issue of securities, whatever their nature, which may lead to
a change in the share capital, regardless of the amount.
REPORT ON CORPORATE GOVERNANCE
2
FUNCTIONING OF THE GENERAL MANAGEMENT
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
21
CONTENTS
1
2
3
4
5
6
7
8
9
2.2.3. Leadership Team (ELT)
.The CEO is assisted by the Leadership Team for the Company’s
daily management pertaining to growth strategy.
The Leadership Team meets usually once a week and as often as
the interest of the Company requires, to report on the activities of
the Company to the CEO. The Leadership Team prepares, with the
support of the specialized committees, all matters submitted to the
prior authorization of the Board of Directors for the execution and/
or implementation of strategic operations.
As at the date of this Universal Registration Document, the
Leadership Team comprises the following members (by alphabetical
order):
2.3.
BOARD OF DIRECTORS
2.3.1. Composition of the Board of Directors
In accordance with Article 10 of the articles of association, the
Company is administered by a Board of Directors composed of at
least three members and at most the maximum number of
members permitted by law, unless a decision is made to increase
this maximum in the event of a merger.
Directors are appointed by the annual Ordinary General Meeting,
on proposal of the Board of Directors, for a term of four years, in
accordance with the recommendations of the Middlenext
Code (R.11). Directors may be re-elected. They may be dismissed at
any time by the Ordinary General Meeting.
The age limit to serve on the Board of Directors is 80. If a member
of the Board of Directors exceeds this limit, he will automatically be
deemed to have resigned. He will nonetheless retain his seat until
the first Board Meeting following the date at which the Director in
question exceeded the age limit.
On the recommendation of the Nomination, Remuneration and
Governance/CSR Committee, and on the proposal of the Board of
Directors in its meeting of 28 February 2022, the General Meeting
of 28 June 2022 amended the Company's Articles of Association to
lower the age limit for the Chairman of the Board to 75 years.
In accordance with the Group’s policy to promote diversity (see
section 4.3.2 of this Universal Registration Document for more
details), the Board of Directors, based on the recommendations of
the Nomination and Governance Committee, seeks to promote
diversity in its composition with regard to criteria such as
independence, age, gender or qualifications and professional
experience. In view of the evolution of the Board’s composition,
these diversity criteria will be decisive in the choice of candidates for
appointment.
2
REPORT ON CORPORATE GOVERNANCE
BOARD OF DIRECTORS
22
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
Cristel de Rouvray
Chief Executive Offi cer
Yannick Charon
Vice-President
Human Resources
Florence Barré
Chief of Staff
CEO Offi ce
Dominique Lefebvre
Senior Vice-President
Product Development
Planning
Corinne Romefort-Régnier
Senior Vice-President General
Secretary & Governance
Francis Griffi ths
Executive Vice-President,
Chief Revenue Offi cer
Emmanuel Leroy
Executive Vice-President,
Chief Product & Technology
Offi cer
Olfa Zorgati
Executive Vice-President
Operations &
Chief Financial Offi cer
CONTENTS
Overview of the Board of Directors from September 6
th, 2022
and until the date of this Universal Registration Document
________
Alex Davern
56 Ä
Irish,
American
P
P
2021
2021
SM 2025
Finance, Leadership, M&A, Listed
company
Yves de Balmann
76 Ä
French,
American
P
P
2016
2020
SM 2024
Finance, Leadership, M&A, Listed
company
Éric d’Hotelans
72 Ä
French
P
P
P
2008
2019
SM 2023*
Technologies, Finance, Leadership,
Listed company
Véronique Jacq
55 Å
French
P
P
2014
2018
SM 2026
Finance, M&A,
Listed company
Rajani Ramanathan
55 Å
American,
Indian
P
P
ó
2014
2018
SM 2026
Technologies, Business,
Leadership, CSR
Patrice Soudan
64 Ä
French
P
P
ó
2021
2021
SM 2024
Finance, Leadership, Technologies,
Listed Company
Observer
Charles-Helen des Isnards
78 Ä
French
2021
2021
SM 2023
*
Finance, M&A, Listed company
Age
Gender
Nationality
Strategic Committee
Audit Committee
Compensation, Nomination
and Governance/CSR
Committee
Start of first term
Start of current term
End of current term
Expertise,
experiences
Members considered as non independent by the Board of Directors (see section 2.3.1.3)
Cristel de Rouvray
46 Å
French-
American
P
ó
1999
2021
SM 2025
Technologies, Leadership, CSR
Members considered as independent by the Board of Directors (see section 2.3.1.3)
60.6 years
AVERAGE AGE
(a)
85.7%
INDEPENDENT
MEMBERS
(a) (b)
42.9%
3 WOMEN & 4 MEN
(a) (c)
57.1%
DIVERSITY
(a) (d)
SM: Shareholders’ Meeting.
ó Chairman.
P Member.
*
Renewal of mandate is not proposed at the Shareholders' Meeting to be held on FY22 financial statements.
(a)
At the date of this Universal Registration Document and excluding the Board Observer.
(b)
At the date of this Universal Registration Document and in accordance with the recommendation R.3 of the Middlenext Code which recommends that the Board include
at least two independent Directors and sets the independence criteria.
(c)
In accordance with the Article L. 22-10-3 of the French Commercial Code.
(d)
Board members/Directors who are foreign nationals, at the date of this Universal Registration Document.
REPORT ON CORPORATE GOVERNANCE
2
BOARD OF DIRECTORS
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
23
CONTENTS
1
2
3
4
5
6
7
8
9
2.3.1.1.
Chair of the Board of Directors
In accordance with Article 11 of the articles of association, the
Board must appoint a Chairman among its physical members, for a
term which may not exceed his mandate.
Since February 8, 2021, Alex Davern acts as Chairman of the Board.
As part of his duties, the Chairman sets the agenda for the Board
Meetings. In accordance with the internal regulations, the Chairman
also chairs the Meetings of the Board, directs the deliberations and
ensures compliance with the internal regulations. The Chairman
also ensures the quality of discussions and the collegiality of
decisions. The Chairman maintains a regular dialogue with the CEO
and the Directors and ensures that they are able to fulfil their
mission. The Chairman may also request any document or
information that may help the Board of Directors prepare for its
meetings and ensures the quality of the information provided to the
Directors prior to their meetings.
2.3.1.2.
Changes in the composition of the Board of Directors and its committees
Changes in the composition of the Board of Directors in 2022
and until the date of this Universal Registration Document
________
Board members
Events
Effective date
Rajani Ramanathan
Renewal
(a)
June 28
th, 2022
Véronique Jacq
Patrice Soudan
Ratification of co-optation
(b)
Observer
Charles-Helen des Isnards
Renewal
(c)
June 28
th, 2022
(a)
For a duration of four years, i.e until the General Meeting which will be held in 2026 to approve the accounts of the year 2025.
(b)
For the remaining term of his resigning predecessor, until the General Meeting to be convened in 2024 to approve the accounts of the year 2023.
(c)
For a duration of one year, i.e until the General Meeting which will be held in 2023 to approve the accounts of the year 2022.
Changes in the composition of the committees in 2022
and until the date of this Universal Registration Document
________
As of September 6
th, 2022, the Compensation, Nomination and
Governance/CSR Committee has been established following the
merger of the Compensation Committee with the Nomination and
Governance/CSR Committee. Its composition from that date until
the date of this Universal Registration Document is set out in
section 2.3.4.3.
The Technology and Marketing Committee has been removed as of
September 6
th, 2022. Members were: Rajani Ramanathan as
Chairwoman, Alex Davern, Cristel de Rouvray, Patrice Soudan as
members.
The following changes should be noted:
Board members
Events
Committees
Effective date
Alex Davern
Termination of mandate of Chairman
by decision of the Board of Directors –
Remain Member
Chairmanship of Nomination and
Governance/CSR Committee
September 6
th,
2022
Eric d’Hotelans
Termination of mandate of Chairman
by decision of the Board of Directors –
Remain Member
Chairmanship of Compensation Committee
Rajani Ramanathan
Appointment by decision of the Board
of Directors
Chairwomanship of Compensation,
Nomination and Governance/CSR
Committee
Patrice Soudan
End of mandate as member
Compensation Committee
2
REPORT ON CORPORATE GOVERNANCE
BOARD OF DIRECTORS
24
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
2.3.1.3.
Independence
In accordance with the recommendations of the Middlenext Code (R.3), following the opinion of the Nomination and Governance Committee,
the Board of Directors analysed and determined at a Meeting of February 27, 2023, the proportion of independent Directors within the Board.
In particular, it examined each of the Directors’ situations in light of the five criteria presuming independence defined by the Code, namely:
Criterion 1
Not to be and not to have been during the course of the previous five years, an employee or corporate officer of the Company
or an entity of the Group
Criterion 2
Not to have been during the course of the previous two years and not to be in a significant business relationship with the
Company or its Group (customer, supplier, competitor, service provider, creditor, banker)
Criterion 3
Not to be majority shareholder or not holding a significant percentage of the Company’s voting right
Criterion 4
Not being related by close family ties to a corporate officer or a majority shareholder
Criterion 5
Not having been an Auditor of the Company during the course of the previous six years
The table below shows each Director’s situation in light of the independence criteria as stated above, and the classification chosen by the
Board of Directors. The Board identified six independent Director out of seven, representing 85.7% of independence, largely above the one-
third of independence recommended by the Middlenext Code for a controlled company.
Director
Criterion 1
Criterion 2
Criterion 3
Criterion 4
Criterion 5
Classification chosen by the
Board of Directors
Cristel de Rouvray
X
X
X
X
✓
Non-independent*
Alex Davern
✓
✓
✓
✓
✓
Independent
Yves de Balmann
✓
✓
✓
✓
✓
Independent
Éric d’Hotelans
✓
✓
✓
✓
✓
Independent
Véronique Jacq
✓
✓
✓
✓
✓
Independent
Rajani Ramanathan
✓
✓
✓
✓
✓
Independent
Patrice Soudan
✓
✓
✓
✓
✓
Independent
X:
Not compliant.
✓:
Compliant.
*
Cristel de Rouvray was a consultant prior to her corporate mandate and is also related to the former Chairman and CEO, who became Chairman of the Board of
Directors before being replaced by the current independent Chairman in February 2021. She also holds 4.17% of the Company's share capital as of 31 December 2022.
2.3.1.4.
Balanced gender representation on the Board
At the date of this Universal Registration Document, the Board of Directors is composed of three women and four men, pursuant to Articles
L. 22-10-3 and L. 225-18-1 of the French Commercial Code.
REPORT ON CORPORATE GOVERNANCE
2
BOARD OF DIRECTORS
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
25
CONTENTS
1
2
3
4
5
6
7
8
9
2.3.2. Offices of Directors
The number of directorships held by Directors is in accordance with the limits set forth in Article L. 225-21 of the French Commercial Code.
This is an important guarantee of their commitment and availability to the Group.
Alex Davern
Ñ Independent Board member
Ñ Chairman of the Board of Directors
Date of birth: 09/23/1966
Irish and US
Shares held at December 31, 2022:
12,024 shares
*
Alex Davern, observer since October 21, 2020, was appointed as
Chairman of the Board following his co-optation as Director on February
8, 2021.
Alex Davern served National Instruments (NATI: NASDAQ, global leader
in automated test and automated measurement systems for 26 years in
different top management positions from Chief Financial Officer, Chief
Operating Officer to Chief Executive Officer. Alex Davern contributed to
the Company’s development until it reached approximately $1.4 billion in
sales with 7,400 people spread in 50 countries in 2019. In Feb 2020, Alex
stepped down from his role as CEO to focus on serving as a Board
member of National Instruments and other listed companies. He is a
former President of the American Electronics Association‘s Small
Business Advisory Committee and a former member of the SEC’s Small
Business Advisory Committee. Alex started his career as Auditor in
PricewaterhouseCoopers. He Graduated from the University College
Dublin with a degree in Commerce and a post graduate Diploma in
Professional Accounting and has both Irish and American citizenships.
Current offices held outside the Group:
Ñ Member of the Board of National Instruments (NATI:NASDAQ)
Ñ Member of the Board and Audit Committee Chairman of Cirrus Logic
(CRUS:NASDAQ)
Ñ Member of the Board and Audit Committee Chairman of FARO
Technologies (FARO:NASDAQ)
Expired offices held over the past five years:
Ñ Member of the Board and Audit Committee Chairman of Helen of Troy
(HELE:NASDAQ)
* See chapter 8.2.5 for all registered shares and bearer shares held at the date of
publication of the Universal Registration Document.
Cristel de Rouvray
Ñ Board member
Ñ Chief Executive Officer
Ñ Chairwoman of the Strategic Committee
Date of birth: 10/15/1976
French, American
Shares held at December 31, 2022:
253,054 shares
Cristel de Rouvray is Chief Executive Officer since February 1, 2019.
Cristel de Rouvray joined the ESI Group Board in 1999. She was
Chairman
of
the
Compensation,
Nomination
and
Governance
Committee from 2007 to 2019 and Board Leader from 2015 to 2019.
She graduated from Stanford University and the London School of
Economics, where she obtained a Ph.D. in economics. She has 14 years
of experience as a Director at College Track, a US non-profit
organization.
Current offices held outside the Group:
Ñ Director of Open Foam Foundation
Expired offices held over the past five years:
Ñ None
2
REPORT ON CORPORATE GOVERNANCE
BOARD OF DIRECTORS
26
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
Patrice Soudan
Ñ Independent Board member
Ñ Chairman of the Audit Committee
(since January 1, 2022)
Date of birth: 09/29/1958
French
Shares held at December 31, 2022:
2,100 shares
Patrice Soudan, a French citizen, was born on September 29, 1958. He
held various positions in finance in an international audit firm and in the
food industry before joining Legrand in 1991.
He began his career as Management Controller, then Director of
Management Control, and finally Group Chief Financial Officer in 2001.
He was appointed Deputy Chief Executive Officer and member of
Legrand’s Executive Committee in 2008, taking over the management of
the group’s main industrial division, and then of all the group’s industrial
divisions and operations as of 2014 until the end of 2018.
Current offices held outside the Group:
Ñ President of P3C Management
Expired offices held over the past five years:
Ñ Chairman of the Board and CEO of Legrand France
Ñ Member of the Board of Netatmo
Rajani Ramanathan
Ñ Independent Board member
Ñ Chairwoman of the Nomination,
Compensation & Governance/CSR
Committee (since September 6, 2022)
Date of birth: 03/25/1967
American, Indian
Shares held at December 31, 2022:
1 share
Rajani Ramanathan currently serves as an advisor and director to several
private technology companies in the AI, VR, Blockchain, and connected
(IoT) technology space. Since June 2021, she serves on the board of the
public company, Guidewire Software, a platform P&C insurers trust to
engage, innovate, and grow efficiently. She has served on their
Compensation Committee and Risk Committee since June 2021 and took
over as Chairperson of their Risk committee in October 2022. Since July
2022, Ms. Ramanathan has served on the board of Faro Technologies, a
publicly traded company serving 3D Metrology, AEC (Architecture,
Engineering & Construction), O&M (Facilities Operations & Maintenance),
and Public Safety Analytics markets. She is a member of their Talent
Development and Compensation Committee.
Since October 2021, she has also served on the board of Hayden AI, a
smart city solutions provider that developed the world's first autonomous
traffic management platform.
From June 2000 to March 2014, Ms. Ramanathan served in a variety of
leadership roles at Salesforce, a cloud software company, most recently
as its Chief Operating Officer and Executive Vice President – Technology
and Products. From December 2021 to present, Ms. Ramanathan has
served as Advisory Council Member, Cybersecurity Executive Education
Program, California State University, Chico.
Current offices held outside the Group:
Ñ Member of the Board of the company Guidewire
Ñ Member of the Board of the company Hayden.ai
Ñ Member of the Board of the company Faro Technologies
Expired offices held over the past five years:
Ñ Member of the Board of the company CloudCherry
Ñ Member of the Board of the company Vayu
REPORT ON CORPORATE GOVERNANCE
2
BOARD OF DIRECTORS
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
27
CONTENTS
1
2
3
4
5
6
7
8
9
Véronique Jacq
Ñ Independent Board member
Date of birth: 01/02/1968
French
Shares held at December 31, 2022:
157 shares
A Civil Engineer and graduate of the École des Mines de Paris (French
engineering school), Véronique Jacq began her career in the Nuclear
Safety Authority (1994-2000). In 1997, she was appointed Deputy
Director in charge of monitoring the safety of EDF nuclear power plants.
In 2000, she joined Anvar (now BPI France) as Director of Business
Development. In 2003, she joined the 2
nd Chamber of the French Court
of Auditors, where she was responsible for auditing financial statements
and management reports of companies and government agencies as
well as international organizations. In 2007, she joined CDC Entreprises,
a CDC subsidiary company specializing in private equity, and in 2010
became Deputy General Manager in charge of Business Development. In
2012, she took responsibility for the investment activity in digital startups
first at CDC Entreprises and then at Bpifrance as of 2013. The Digital
Venture activity she is piloting in Bpifrance covers seed and venture
capital operations in enterprise software, consumer, marketplaces,
hardware, IoT (€700 millions under management).
Current offices held outside the Group:
Ñ Member of the Board of the company Evaneos
Ñ Member of the Board of the company OpenClassrooms
Ñ Member of the Board of the company Scality
ÑMember of the Board of the company Famoco
Ñ Board observer of the company Acinq
Ñ Board observer of the company Uavia
Expired offices held over the past five years:
Ñ Member of the Board of the company Netatmo
Ñ Member of the Board of the company Klaxoon
Ñ
Ñ Member of the Board of the company Cardiologs
Éric d’Hotelans
Ñ Independent Board member
Date of birth: 03/07/1950
French
Shares held at December 31, 2022:
261 shares
Éric d’Hotelans held positions in the information technology sector, first
at Tandem (US computer manufacturer, taken over by HP), where he
headed the Europe/Finance Business Unit. In 1997, he joined CMG, one
of the oldest European IT services companies, as a member of the
Executive Committee. In this capacity, he created CMG France
(1,200 employees), the Group’s French subsidiary, of which he became
Chairman and CEO. He left CMG group in 2003, following its acquisition
by UK group Logica. He then participated in the development of an
investment fund based in Riyadh, Saudi Arabia, specializing in research
and analysis of IT-related activities. In 2003, he joined the Board of
Directors of M6 Group as Deputy Chairman in charge of management
activities. President of the Group’s online sales since 2009, he retired in
July 2017.
Current offices held outside the Group:
Ñ Member of the M6 Group Corporate Foundation
Expired offices held over the past five years:
Ñ President of the company Home Shopping Services SA
Ñ President of the company T-Commerce SAS
Ñ Member of the Board of the company Société Nouvelle de Distribution SA
Ñ Member of the Board of the company Métropole Production SA
Ñ Managing Director of the company Home Shopping Services SA
ÑChairman of the Board of the M6 Group Corporate Foundation
Ñ Member of the Board of the company M6 Films
Ñ Member of the Board of the company M6 Diffusion SA
Yves de Balmann
Ñ Independent Board member
Date of birth: 05/28/1946
French, American
Shares held at December 31, 2022:
1 share
A graduate of Stanford University in the United States and École
Polytechnique in France, Yves de Balmann began his career at Citibank
where he served as North American Executive Director for the Rates and
Currency Derivatives Division, as well as its Proprietary Trading
Department. He joined Bankers Trust in 1988, where he eventually rose
to become Head of its Global Investment Bank and Vice-Chairman of the
Corporation. After the 1999 merger of this company with Deutsche
Bank, de Balmann became Co-Head of the Global Investment Bank (GIB)
of Deutsche Bank and Co-Chairman and Co-CEO of Deutsche Bank Alex.
Brown, the US division of the German bank, which brings together
investment banking and intermediation activities. He held these
positions until 2001. He also served on the Board of the Global
Corporates and Institutions Division (GCI). In 2002, he created the
company Bregal Investments, a top international player in the field of
private equity, which he co-managed until 2012.
Current offices held outside the Group:
Ñ Member of the Board of the company Constellation
Ñ Member of the Board of the non-profit organization Sonoma Valley
Hospital Foundation
Expired offices held over the past five years:
Ñ Member of the Board and non-executive Chairman of the company IP
Management
Ñ Member of the Board of the company Laureate Education
Ñ Member of the Board of the non-profit organization Sweetwater
Spectrum
Ñ Member of the Board of the company Finalsite
Ñ Member of the Board of the company Exelon Corporation
Charles-Helen des Isnards
Ñ Observer since February 8, 2021
Date of birth: 01/01/1945
French
Shares held at December 31, 2022:
3,551 shares
Charles-Helen des Isnards, Board member until February 8, 2021, date
of his appointment as observer.
He is a graduate of the Paris Institute of Political Studies and holds a
degree in law. After an international career within BUE, UBAF and CIC
Group in France and in Italy, Charles-Helen des Isnards contributed to
the creation of CIC Finance as member of the Board. He served as
Deputy Chief Executive Officer of CM-CIC Corporate Advisory until
September 2012.
Current offices held outside the Group:
Ñ Member of the Board of the Day-Solvay Foundation
Expired offices held over the past five years:
Ñ Member of the Board of the association Les Arts Florissants
Ñ Member of the Supervisory Board of the company Nature
et Découvertes
Others offices held:
Ñ Senior Advisor of CAP M – New York, independent consulting firm
on strategy and M&A
2
REPORT ON CORPORATE GOVERNANCE
BOARD OF DIRECTORS
28
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
2.3.3. Operations of the Board of Directors
2.3.3.1.
Internal rules
of the Board of Directors
The Board of Directors adopted internal rules which set out the
operational procedures of the Board and its committees, as well as
the rules of professional ethics applicable to all Directors and
Observers. These internal rules were reviewed by the Board of
Directors:
■On October 21, 2020 in order to update it with the PACTE law
No. 2019-486 of May 22, 2019, to establish the function of
Observer, and as well as to limit the role of the Chairman of the
Board of Directors to legal provisions;
■On February 8, 2021 to take into account the change of
governance;
■On February 28, 2022, to be in compliance with the last
recommendations of the Middlenext Code as revised in
September 2021 regarding the training of Board members, the
independance of the chairmanship of the committees, and the
communication of potential conflicts of interests by any Board
member involved with respect to each session agenda. The new
remuneration policy for the Board members has been updated;
■On 6 September 2022, the Board of Directors adopted new
updates to its internal regulations in compliance with the
recommendations of the Middlenext Code regarding the
remuneration policy of the members of the Board of Directors,
but also regarding the monitoring of conflicts of interest and,
finally, in line with the new simplified committee structure in
place as of 6 September 2022.
The Internal Rules of the Board of Directors can be consulted on
the Company’s website (www.esi-group.com). Considering the new
recommendation of Middlenext, each Board of Directors signed a
copy of the last version of the internal rules.
In accordance with recommendations of the Middlenext Code (R.9),
these Internal Rules specify in particular the following points:
■The role of the Board and, as the case may be, operations
subject to the prior authorization of the Board;
■Composition of the Board/independence criteria of the
members;
■Definition of the missions of any specialized committees set up;
■Duties of the members (deontology: loyalty, non-competition,
disclosure of conflicts of interest and duty of abstention, ethics,
confidentiality, etc.);
■Operation of the Board (frequency, convening, information of
the members, self-assessment, use of videoconferencing and
telecommunication facilities, etc.);
■Protection of corporate officers: liability insurance for corporate
officers;
■Rules for determining the remuneration of Directors;
■The succession of the officers and key people.
2.3.3.2.
Professional ethics of Board
members and prevention
of conflicts of interest
Regarding professional ethics, the Board members refer to the
Director Charter set forth by the French Institute of Corporate
Directors (IFA) and appended to the Internal Rules of the Board of
Directors.
Concerning prevention and management of conflicts of interest, the
Internal Rules recommend that each Director strive to avoid any
potential conflict between his moral and material interests and
those of the Company. Each Director is bound to inform the Board
of any potential conflict of interest. During each Board of Directors
Meeting, each Board Member is requested to communicate any
potential conflict of interest with respect to the agenda, and in
compliance with the Middlenext recommendations (R.2). Should the
Director be unable to avoid a conflict of interest, he must abstain
from taking part in the debates as well as any decision on the
subjects concerned.
In addition to comply with the procedure of regulated agreements
which are subject to prior authorization by the Board of Directors in
accordance with Article L. 225-38 of the French Commercial Code,
the Board examines each year in accordance with Article
L. 225-40-1 of the French Commercial Code, the regulated
agreements concluded and authorized during previous financial
years. During this annual review, the management informs the
Board, if necessary, of any significant new agreements between the
Company and a subsidiary relating to current operations concluded
under normal conditions, thus allowing the Board to assess if these
conditions are actually met. It is specified that the persons directly
or indirectly interested in one of these agreements do not
participate in this assessment.
To the Company’s knowledge and as at the date of this Universal
Registration Document, there is no conflict of interest between the
duties of the individual Board members with respect to the
Company and their private interest and other duties.
2.3.3.3.
Duties and powers
of the Board of Directors
The Board of Directors is and must remain a collegial body that
collectively represents all shareholders. It must act in the
Company’s corporate interests under any and all circumstances.
The Board of Directors determines the guidelines for the
Company’s operations and oversees their implementation. Subject
to the powers expressly given, under the law, to General Meetings,
the Chairman and Chief Executive Officer and the Chief Operating
Officers and within the limit of the corporate object, the Board of
Directors may handle any matter relevant to the Company’s
operations and decides on all matters within its responsibility.
REPORT ON CORPORATE GOVERNANCE
2
BOARD OF DIRECTORS
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
29
CONTENTS
1
2
3
4
5
6
7
8
9
The
Board
of
Directors
is
entrusted
with
the
following
responsibilities in accordance with the law:
■Preparing for and convening Annual General Meetings;
■Preparing the resolutions to be voted on by the shareholders;
■Deciding on the executive management structure of the
Company by opting to appoint as Chief Executive Officer either
the Chairman of the Board of Directors or another individual;
■Determining the powers that may be delegated to a subsidiary’s
legal representative and setting monetary limits on these
powers;
■Preparing parent company and consolidated annual financial
statements and interim financial statements, the annual
management report and the interim financial report, as well as
approval of these documents;
■Approving the report of the Board of Directors on corporate
governance;
■Approving the agreements referred to in Article L. 225-38 of the
French Commercial Code;
■Authorizing guarantees and similar undertakings;
■Appointing or dismissing the Chairman, the Chief Executive
Officer and the Chief Operating Officers, and supervising their
management of the Company;
■Allocating Directors’ compensation;
■Creating committees within the Board of Directors, defining their
responsibilities and operational procedures, appointing and
determining the compensation of the members of these
committees;
■Establishing and updating the internal rules of the Board of
Directors.
Certain transactions considered to be outside the scope of day-to-
day management of business are subject to the prior authorization
of the Board of Directors, as defined by the internal rules
(section 2.2.3.1 of this Universal Registration Document).
2.3.3.4.
Organization
of the Board of Directors’ work
In accordance with the internal rules, the Directors shall each
receive, within a reasonable time before each Meeting of the Board,
a file containing the agenda of the Meeting, the draft minutes of the
previous Meeting and any relevant documentation relating to each
of the items on the agenda. The Chairman answers to requests
from Directors for additional information. The Directors consider as
at this date, that they receive a complete and sufficient information
to fulfil their mission.
In addition, each issue raised during the session is thoroughly
discussed and debated among members before being put to the
vote at the end of the discussion. Lastly, the Directors are regularly
informed between meetings whenever the Company’s situation
requires, in accordance with Recommendation R.6 of the
Middlenext Code.
The Board meets as often as required for the interests of the
Company. The frequency and length of the Board of Directors’
Meetings must be such as to allow members to conduct an in-
depth review and discussion of the topics falling under its
responsibility. The same principle applies to Meetings of Board
committees.
In accordance with Middlenext Code Recommendation R.6, the
internal rules state that the Board of Directors meets at least four
times per year.
The Board systematically meets to:
■Draw up the annual financial statements and prepare for the
Annual General Meeting called to approve said financial
statements;
■Report on half-year results;
■Discuss the financial position, the cash position, the Company’s
obligations and the share buyback program.
The Board of Directors must also meet, when convened by the
Chairman, in the event of major operations such as the following:
■Business acquisitions or sale;
■Significant operations outside the Group’s established strategy;
■Organic growth or restructuring operations.
The draft minutes of each Board of Directors Meeting are formally
approved and signed by the Board members during the
subsequent Meeting. The minutes set out the discussions, specify
the decisions made and mention the questions and reservations
raised.
Furthermore, during each Board Meeting any major facts or events
pertaining to the Company’s operations or its general situation
arising since the previous Meeting are brought to the Board
members’ attention.
Board of Directors’ Meetings are not valid unless at least half of its
members are in attendance. The Board’s decisions are made by
majority vote among the members present or represented. In the
event of a tie, the Chairman of the Meeting has a casting vote. In
accordance with the provisions of the articles of association, Board
members who attend the Board Meeting via videoconference or
teleconference are considered present as for the quorum. This
provision does not apply to decisions for which the French
Commercial Code expressly excludes the use of this process unless
specific derogations related to sanitary measures.
An attendance sheet is drawn up and signed by the Board
members attending the Board of Directors’ Meeting.
2.3.3.5.
Training
The internal rules of the Board of Directors states on point 2.11 that
“Each Director may receive additional training on the specific
characteristics of the Group, its businesses and sectors of activity as
well as on accounting and financial aspects in order to improve his
or her knowledge.”
This may involve external or internal training courses either on
governance or on the activity of the Company, as it is the case
during internal seminars focusing on the Company’s business. Such
training is organized by the Company and is its sole responsibility.
Aware of recommendation No. 5 of the Middlenext Code of
Governance on the three-year training plan, directors received
training in 2022 on the digitalisation of Board and committee
meetings, with a presentation of the dedicated platform deployed
for this purpose during the year.
The Board’s retreats, held in January and July 2022 in Paris, enabled
the Directors, to keep abreast of the Group’s news and the
specificities of its business sector. In addition, some workshops
have been organised on specific topics linked to governance and
business activities.
2
REPORT ON CORPORATE GOVERNANCE
BOARD OF DIRECTORS
30
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
2.3.3.6.
Works of the Board of Directors in 2022
In 2022, the Board of Directors held six Meetings. The attendance rate was 98%.
Attendance of Directors at Board Meetings in 2022
________
Dates of Board of Directors’
Meetings
28/02/2022
02/05/2022
28/06/2022
06/09/2022
21/10/2022
17/11/2022
% of
attendance
Alex Davern
✓
✓
✓
✓
✓
✓
100
Cristel de Rouvray
✓
✓
✓
✓
✓
✓
100
Yves de Balmann
✓
✓
✓
✓
✓
✓
100
Éric d’Hotelans
✓
✓
✓
✓
✓
✓
100
Véronique Jacq
✓
✓
x
✓
✓
✓
83
Rajani Ramanathan
✓
✓
✓
✓
✓
✓
100
Patrice Soudan
N/A
N/A
N/A
N/A
✓
✓
100
OVERALL ATTENDANCE
DIRECTORS
97.60
Charles-Helen des Isnards
✓
✓
✓
✓
✓
✓
100
OVERALL ATTENDANCE
OBSERVERS
100.00
This table summarizes the attendance of all committees during the year. As of September 6, 2022 the Compensation Committee and the
Nominations/Governance Committee have been merged. The Technology and Marketing Committee has been abolished in order to meet as a
Board on these subjects.
Strategic
Committee
Audit
Committee
Nomination and
Governance Committee
Compensation
Committee
Technology and
Marketing Committee
Compensation,
Nomination &
Governance/CSR
Committee
Director/
Observer
Attendance
rate
Number
of
meetings
Attendance
rate
Number
of
meetings
Attendance
rate
Number
of
meetings
Attendance
rate
Number
of
meetings
Attendance
rate
Number
of
meetings
Attendance
rate
Number
of
meetings
Alex Davern
100%
2/2
—
—
100%
3/3
100%
2/2
100%
2/2
100%
1/1
Cristel de
Rouvray
100%
2/2
—
—
—%
—
—%
—
100%
2/2
—%
—
Yves de Balmann
100%
2/2
—
—
—%
—
100%
6/6
—%
—
100%
1/1
Éric d’Hotelans
100%
2/2
75
3/4
100%
3/3
100%
6/6
—%
—
100%
1/1
Véronique Jacq
100%
2/2
100
4/4
—%
—
—%
—
100%
2/2
—%
—
Rajani
Ramanathan
100%
2/2
—
—
100%
3/3
100%
6/6
100%
2/2
100%
1/1
Patrice Soudan
100%
2/2
100
4/4
—%
—
100%
4/4
—%
—
—%
—
OVERALL
ATTENDANCE
DIRECTORS
RATE
100%
—
92
—
100%
—
100%
—
100%
—
100%
—
Charles-Helen
des Isnards
100%
2/2
100
4/4
100%
3/3
100%
6/6
—%
—
100%
1/1
OVERALL
ATTENDANCE
OBSERVERS
RATE
100%
—
100%
—
100%
—
100%
—
—%
—
100%
—
REPORT ON CORPORATE GOVERNANCE
2
BOARD OF DIRECTORS
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
31
CONTENTS
1
2
3
4
5
6
7
8
9
The Directors exchange information without the presence of the
executive, as provided for in paragraph 2 of article 2.4.2 of the
Board of Directors ‘internal rules and in application of the latest
Middlenext recommendations in force (R6). These exchanges take
place several times a year, in particular after Board meetings to
debrief.
In addition to approving the minutes of previous Board meetings
and the systematic review of any conflicts of interest of its members
at the beginning of each meeting, particularly with regard to the
items on the agenda of Board meetings, and beyond the usual
decisions in the framework of the Company’s activity and results,
the main items discussed, and decisions taken by the Board of
Directors at its meetings in 2022 were as follows:
/ Corporate Governance
On 28 February 2022, the Board of Directors, on the proposal of
the Nomination and Governance Committee, decided to submit to
the vote of the General Meeting, convened on 28 June 2022 to
approve the 2021 financial statements, the renewals of the terms of
office of Rajani Ramanathan and Véronique Jacq as directors, as well
as the appointment of Charles Helen des Isnards as Observer for
one year. It also noted the resignation of Alain de Rouvray from his
position as director, effective 16 December 2021.
The Board also examined the independence criteria for directors
based on the proposal of the Nomination and Governance
Committee.
In addition, the Board of Directors discussed issues related to its
functioning and the preparation of its works, the policy related to
internal control and the implementation of the program of shares
buy back.
The Board of Directors conducted its annual review of the purpose
and application of the regulated agreements to be continued,
verifying, where applicable, whether they still meet the criteria that
led it to give its initial approval.
Finally, the Board of Directors, meeting on 28 February 2022,
updated its Internal Rules in particular to reflect the following
changes:
■Alignment with the new Middlenext governance code and
lowering of the statutory age limit for the Chairman of the Board
of Directors and the Chief Executive Officer in order to comply
more closely with best market practices;
■Implementation of a digital governance platform dedicated to
the organization and holding of Board and Committee meetings;
■Board compensation policy for the year 2022;
■Name and evolution of ESI’s Leadership Team.
Following the Combined General Meeting of 28 June 2022, the
Board of Directors confirmed the committee mandates of Rajani
Ramanathan and Véronique Jacq and analyzed the votes of the
General Meeting of Shareholders.
As part of the Group’s transformation plan, the Board of Directors
decided on several divestitures for activities that were not
considered as core business.
In addition, intra-group restructuring operations were approved by
the Board of Directors for reasons of legal simplification, relating to:
■The effective merger of ESI ITI GmbH and ESI GmbH within ESI
Software Germany GmbH having been renamed ESI Germany
GmbH;
■The closing of the representative office in Russia;
■The liquidation of ESI Services Vietnam Co, LTD;
■The merger of the two subsidiaries US R&D, Inc. and ESI North
America, Inc.;
■The appointment of a permanent legal representative for ESI
Hispania.
At its meeting on 6 September 2022, the Board of Directors, on the
proposal of the Nomination and Governance Committee and after
deliberations at the Board Retreat in July 2022, decided to simplify
the committee structure in line with the recommendations of the
Middlenext governance code and to review the composition of each
committee, applicable on the same day.
It has thus proceeded to a second update, during the financial year,
of its Internal Rules on 6 September 2022 with immediate effect,
which has been submitted for signature to all members of the
Board, in order to reflect:
■The simplification of its committee structure;
■The alignment of the compensation policy of the Board of
Directors;
■The strengthening of the prevention and management of
conflicts of interest, which is systematically included on the
agenda of each Board meeting.
/ Activity and results
The systematic and in-depth review of the Company’s activity is
carried out at each meeting.
In accordance with the recommendation of the Audit Committee,
the Board of Directors held on February 28, 2022:
■Approved the turnover for the financial year 2021;
■Noted the capital increase following the exercise of options
during the financial year 2021;
■Approved the results for the financial year 2021, which are
subject to approval by the ordinary general meeting of 28 June
2022;
■Defined the strategic orientations.
The budget for the 2023 financial year was approved at the meeting
of the Board of Directors on 17 November 2022.
A review of all the company’s main risks was also carried out,
particularly in the geopolitical context.
2
REPORT ON CORPORATE GOVERNANCE
BOARD OF DIRECTORS
32
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
/ Compensation policy and human resources
On 28 February 2022, the Board of Directors decided to submit to
the vote of the General Meeting of Shareholders on 28 June 2022:.
■The compensation distribution to be paid to the Directors and
the Chief Executive Officer for the financial year 2021;
■The compensation policies for the Directors, the Chairman of the
Board of Directors and the senior executives for the financial
year 2022;
■The components of the variable compensation applicable to the
Chief Executive Officer for the financial year ending 31
December 2022.
On September 6, 2022, the Board approved the new compensation
policy for the Board members for the financial year 2023, including
the compensation of the Chairman, based on the recommendation
of the Nomination, Compensation and Governance/CSR Committee.
On 17 November 2022, based on the recommendations of the
Nomination, Compensation and Governance/CSR Committee, the
Board of Directors was asked for the first applicable year to decide
on the achievement of the qualitative performance of the Chief
Executive Officer’s long-term incentive plan based on a stock option
plan, granted by the Board on 10 September 2021.
At the meetings of 28 June 2022 and 17 November 2022, the Board
of Directors deliberated on the long-term incentive plans in place
for the benefit of the CEO, certain executives and beneficiaries for
free shares and stock options.
As every year, the Board deliberated on the Company’s policy on
corporate social responsibility and, in particular, on professional
equality between women and men. This policy is detailed in the
Statement on Extra-Financial Performance in section 4.3.2. of this
document.
2.3.3.7.
Board assessment
In accordance with Middlenext Code Recommendation R.13 and
with the provisions of Article 2.9 of the Board of Directors Internal
Rules, the Board of Directors carried out during 2022 financial year,
a yearly internal self-assessment of its composition, organization
and mode of operation. This assessment was performed using a
questionnaire addressed to each Director. The results of the self-
assessment were shared during the annual Retreat and during the
Board Meeting held on September 6, 2022. This evaluation led to
the redesign of the committees towards a simplification of the
governance. Reflections were raised on the achieved Company’s
transformation work, which should allow the improvement of the
performance, as well as the need to bring new expertise to support
the development strategy.
2.3.4. Specialized committees
The Board of Directors may decide on the creation within its Board
of committees of which it determines the composition
(1)
(see section 2.3.3.1 above) and defines the missions in the internal
rules. The committees carry out their activities under the Board’s
sole responsibility. The Board of Directors remains the decision-
making body. The purpose of the committees is to optimize the
discussions of the Board of Directors and to ensure it is prepared to
make its decisions. The committees thus draw up proposals,
recommendations and opinions relative to their respective areas at
each of their meetings. In accordance with current legislation and
Middlenext Code Recommendation R.7, the following committees
have been established within the Company:
■The Strategic Committee;
■The Audit Committee;
■The Compensation, Nomination, Governance/CSR Committee.
As of September 6, 2022 the Compensation Committee and the
Nomination and Governance/CSR Committee have been merged.
The Technology and Marketing Committee has been abolished in
order to meet as a Board on these subjects.
The attendance of the Directors at the Committees’ Meetings during
financial year ended on December 31, 2022 is presented under
section 2.3.3.6 above.
REPORT ON CORPORATE GOVERNANCE
2
BOARD OF DIRECTORS
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
33
(1)
The composition of all the committees was reviewed during the Board Meetings held on February 8, 2021 and September 3, 2021.
CONTENTS
1
2
3
4
5
6
7
8
9
2.3.4.1.
Strategic Committee
Composition since September 6, 2022 until the date of the present document
Cristel de Rouvray (Chairwoman)
Alex Davern*
Yves de Balmann*
Éric d’Hotelans*
Véronique Jacq*
Rajani Ramanathan*
Patrice Soudan*
7
members
(a)
100%
attendance rate
(a)
2
meetings
(a)
*
Independent members in accordance with recommendation R.3 of the Middlenext Code (see above section 2.3.1.3).
(a)
At December 31, 2022.
The Strategic Committee is namely in charge of, upon proposal
from the Chief Executive Officer:
a. Considering the position occupied by ESI Group on the market
where the Group operates as well as its expected evolution,
taking into account the development of major competitors;
b. Making proposals to the Board on the main lines of
development of the Group in the medium/long term as well as
the necessary resources to conduct this development;
c. Analyzing M&A opportunities.
2.3.4.2.
Audit Committee
Composition in 2022 until the date of the present document
Patrice Soudan* (Chairman)
Véronique Jacq*
Éric d’Hotelans*
3
members
(a)
92%
attendance rate
(a)
4
meetings
(a)
*
Independent members in accordance with recommendation R.3 of the Middlenext Code (See above section 2.3.1.3).
(a)
At December 31, 2022.
In accordance with regulations in force, Board members having
executive roles within the Company are not allowed to serve as
members of the Audit Committee, and all members are
independent. In addition, the majority of its members have
expertise in the area of finance or accounting.
The CEO and the Chief Financial Officer of the Company attend the
Meetings of the Audit Committee as guests in accordance with
Middlenext recommendations and best market practices.
Similarly, the Chairman of the Board of Directors no longer attends
the Audit Committee as a member but as a guest if applicable.
According to the regulation in force, the Audit Committee monitors
issues relating to the preparation and control of accounting and
financial information.
Without prejudice to the powers of the bodies responsible for
administration, management and supervision, the Audit Committee
is responsible, in particular, for the following tasks:
■Monitoring the process of drawing up financial and extra-
financial documents and, if necessary, making recommendations
to ensure their integrity;
■Monitoring the effectiveness of internal control and risk
management systems as well as internal audit systems, if
necessary, in terms of the preparation and processing of
financial and accounting information, when such initiatives are
compatible with the Committee’s independence;
■It controls the foreign exchange and interest rate risk
management policy and reviews the mapping of the main risks;
■Issuing a recommendation regarding appointment of Auditors by
the General Meeting, as well as regarding the potential
reappointment of Auditors;
■Monitoring Auditors as they fulfil their duties;
■Ensuring Auditors’ independence;
■Regularly reporting to the Board of Directors regarding on its
activities and the results of certification of financial statements,
how said certification has contributed to the integrity of financial
information, and the role that the Committee played in the
process. The Committee immediately reports any problems that
may arise;
■It makes a global review on the services other than account
certification (SACC) which can be ordered by the Company.
The Statutory Auditors are invited to participate in the Board
Meetings that validate the sales figures and the financial
statements.
2
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
2.3.4.3.
Compensation, Nomination and Governance/CSR Committee
Composition since September 6
th, 2022 and until the date of the present document
Rajani Ramanathan* (Chairwoman)
Alex Davern*
Éric d’Hotelans*
Yves de Balmann*
4
members
(a)
100%
attendance rate
(a)
10
meetings
(a) (b)
*
Independent members in accordance with recommendation R.3 of the Middlenext Code (See above section 2.3.1.3).
(a)
At December 31, 2022.
(b)
Total number of meetings over the 2022 financial year including those of (i) the Compensation Committee and those of (ii) the Nomination and Governance Committee,
the two committees having merged into the Compensation, Nomination and Governance/CSR Committee.
The mission of the Compensation, Nomination and Governance/
CSR Committee is to prepare the decisions of the Board of
Directors concerning:
■The composition of the Board in view of the composition and
evolution of the shareholding of the Company, research and
evaluation
of
potential
candidates,
the
opportunity
of
reappointments;
■The procedure for selecting future Directors and observers;
■The succession plan for corporate officers in case of unexpected
vacancy, hiring, nomination or dismissal of officers;
■The criteria of independence of Directors and assessment of
independence;
■The assessment procedures of the functioning of the Board and
its committees;
■In deliberation with the CEO, appointment and dismissal of
senior management positions, primarily in the ELT;
■The monitoring of the Corporate Social Responsibility (CSR)
policy in line with the Group’s strategy in alignment with
Middlenext recommendation (R8);
■The compensation policy of the Group, in particular for key
Directors and corporate officers, based on information provided
by the Finance and Human Resources Departments;
■The general policy to grant options to subscribe or purchase
shares or free shares, reported in the annual report and the
special report dedicated to the shareholders at the General
Meeting, and the frequency of allocations;
■The allocation of stock options or purchase of shares in favor of
employees and/or corporate officers, as well as any pattern of
ownership of Employees (profit sharing, etc.), to issue an opinion
on the legal and financial conditions of these plans, and the list
of beneficiaries related to strategic goals;
■The Company’s policy on equal pay and equal wages for all
employees and between women and men (Article L. 225-37-1 of
the French Commercial Code).
2.3.5. Function of Observer
2.3.5.1.
Role
The Extraordinary General Meeting of October 21, 2020 approved
the amendment to the articles of association which incorporates
the function of observer. An Article 16 has thus been inserted in the
ESI Group’s articles of association
(1). The number of observers may
not exceed four. They are appointed for a maximum period of
one year.
The observers have a general and permanent advisory and
supervisory role for the Company. They are responsible for
ensuring the strict application of the articles of association and their
main mission is to participate, as necessary, in Meetings of the
Board of Directors and committees, to provide the necessary
information, their expertise and their knowledge of the various
businesses of the Company. When they attend Board Meetings or
committees, they have an advisory capacity. They should not
interfere in the management of the Company under any
circumstances.
The Board of Directors’ internal regulations
(2) have also been
updated in order to align the obligations and responsibilities of the
observers with those of the Directors.
The Board of Directors may devote a part of the compensation that
the General Assembly granted to the Board members to the
observers and/or allocate to them exceptional compensations.
2.3.5.2.
Appointment of observers
On October 21, 2020, the Board of Directors appointed Alex Davern
as observer, in accordance with the recommendations of its
Nomination and Governance Committee.
On February 8, 2021, following the resignation of Charles-Helen des
Isnards from the Board of Directors, Alex Davern was co-opted as
Director, for the remaining term of office, thereby ceasing his
function as observer. Charles-Helen des Isnards was appointed, on
the same date, observer until June 22, 2021. His renewal as
observer has been decided by the Shareholders’ Meeting held on
June 22, 2021 for a duration of one year, then by the General
Meeting of Shareholders of 28 June 2022 for the same term i.e. until
the General Meeting to be held in 2023 to approve the accounts for
the year 2022 (resolution No. 9). It will not be proposed to this
General Meeting to renew this Observer mandate.
REPORT ON CORPORATE GOVERNANCE
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BOARD OF DIRECTORS
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
35
(1)
https://investors.esi-group.com/regulated-information
(2)
https://investors.esi-group.com/governance/governance and section 2.3.3.1 above.
CONTENTS
1
2
3
4
5
6
7
8
9
2.3.6. Relationships with shareholders
The Board of Directors ensures that dialogue with the Company’s
shareholders can always take place under the best possible
conditions. In particular, the Directors and the Observers are invited
to attend the General Meeting and analyze the results of the vote
on each resolution. They pay special attention to negative votes so
as to draw the appropriate conclusions before the following
General Meeting.
Moreover, in addition to the General Meeting, the Chief Executive
Officer and Chief Financial Officer regularly meet with shareholders
and investors at Individual Meetings and during roadshows and
conferences, provided that such events do not take place during
blackout periods.
2.4.
COMPENSATION PAID TO THE DIRECTORS
AND THE MANAGEMENT
This section is an integral part of the corporate governance report
referred to in Article L. 225-37 of the French Commercial Code. The
purpose of this report by the Board of Directors on the
remuneration policy for Executive Directors (in this case the Chief
Executive Officer of the Company) and the remuneration of
Directors is to present the following information:
■Remuneration policy for the Executive Directors (i.e. Chairman of
the Board of Directors, Chief Executive Officer and members of
the Board of Directors by virtue of their office) submitted to the
vote of the 2023 General Meeting (“Ex Ante” vote);
■Remuneration for the financial year ending 31 December 2022
(“Ex Post” vote);
■Total remuneration of the Corporate Officers.
2.4.1. Compensation policy for corporate officers for 2023 financial year
In accordance with Article L. 22-10-8 of the French Commercial
Code, you are presented below with the remuneration policy
established by the Board of Directors on 27 February 2023, on the
proposal of the Remuneration, Nomination and Governance/CSR
Committee.The principles and criteria of definition and allocation of
the
fixed,
variable,
exceptional
components
of
the
total
remuneration as well as benefits in kind payable to the corporate
officers for financial year are presented below and will be subject to
the approval of the Shareholders’ Meeting to be held on June 29,
2023.
The 2023 Shareholders' meeting will be asked to vote on the
remuneration policy for corporate officers (the "Ex Ante" vote). To
this end, three resolutions will be presented for the Chairman, the
CEO and the Directors respectively. It should be noted that
resolutions of this nature are submitted each year to the
Shareholders’ Meeting for approval under the conditions provided
for by law.
This chapter includes the following elements:
■The remuneration policy;
■The report on the remuneration paid during the past financial
year or awarded for the same financial year, required under
Articles L. 22-10-34, I and II and L. 22-10-9, I (the “Ex Post” vote)
and including in particular;
• The information mentioned in I of Article L. 22-10-9 of the
French Commercial Code (see 4.2.2.1) concerning each
corporate officer, as well as the ratios between the
remuneration of each of the Executive Directors and the
remuneration of employees within the Group and their
evolution over 5 financial years with regard to the Group’s
performance, which will be the subject of a resolution
submitted to the vote of the 2023 Shareholders' meeting
pursuant to Article L. 22-10-34, I of the French Commercial
Code (the “Ex Post Global” vote);
• The fixed, variable and exceptional components of the total
remuneration and benefits of any kind paid during the
financial year or granted in respect of the same financial year
to the Executive Directors, which are the subject of a separate
resolution for the Chairman and the Chief Executive Officer
(see 4.2.2.2) (the “Ex Post Individual” vote);
• The standardised tables summarising the information to be
included in the Universal Registration Document on the
remuneration paid or awarded to corporate officers by the
company and any other company included in the scope of
consolidation;
• The reports required by Articles L. 225-184 and L. 225-197-4
of the French Commercial Code on the granting of stock
options and free shares (see 2.4.3).
The table below gives details of the votes by resolution (votes:
Ex Post individual and Ex Ante) relating to the remuneration of
executive directors.
Individual Ex Post Remuneration (% of positive votes)
Ex Ante Remuneration (% of positive votes)
Name and Title
Resolution
FY21
FY20
Resolution
FY22
FY21
Alex Davern - Chairman
12
84.4%
—
15
100 %
82.16%
Cristel de Rouvray - Chief
Executive Officer
13
84.4%
82.16%
16
84.4%
79.03%
2
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
2.4.1.1.
Compensation policy applicable
to Directors and Chairman
of the Board of Directors
for 2023 financial year
/ Directors’ compensation
For
their
mandate,
the
independent
Directors
receive
compensation, the total amount of which is set by the General
Meeting. The maximum amount of the remuneration package to be
distributed among the Directors is voted by the Shareholders'
Meeting on the basis of a proposal by the Board, taking into
account the recommendations of the Compensation, Nomination
and Governance/CSR Committee and taking into account the
company’s interest. This amount remains unchanged until a new
decision by the General Meeting. The Compensation, Nomination
and Governance/CSR Committee assesses each year whether the
amount of this envelope is adapted to the number of Board and
Committee meetings and the number of directors and/or
Committee members. The allocation is made, on proposal of the
Compensation, Nomination and Governance/CSR Committee to the
Board of Directors, according to the following criteria:
1. Frequency of Meetings and participation (effective presence);
2. Chairmanship of specialized committees;
3. Chairmanship of the Board of Directors.
Non-independent Directors receive fixed compensation without
being subject to presence condition depending on existing of
current corporate officer’s role.
/ Chairman of the Board of Directors’
compensation
The compensation of the Chairman is only linked to the attribution
of Board fees.
The compensation policy of Directors and Chairman of the Board of
Directors for the 2022 financial year was approved by 100% of the
votes of the General Meeting of June 28, 2022.
The draft resolutions (Nos. 11 and 9) related to the remuneration
policy attributable to the members and to the Chairman of the
Board of Directors for 2023 and submitted to the General Meeting
of June 29, 2023, are presented in chapter 7 of this Universal
Registration Document.
This remuneration policy has been established in accordance with
the principles of taking involvement into account and allows for the
valuation of professionalism and effective contribution (R.12) as
defined in the Middlenext Code.
Below is a summary of the compensation policy attributable to the
Directors and the Chairman of the Board of Directors for the 2023
financial year as decided by the Board of Director on September 6,
2022. It is specified that the compensation of the Chairman of the
Board may be combined with the one of member of the Board of
Directors and member of the committees.
The overall remuneration package was set at 450,000 euros by the General Meeting of 22 June 2021 and has remained unchanged in 2022
and 2023.
Allocation of compensation for Directors
(a)
(Per year, in €)
________
Board
Chairmanship
Board of
Directors
Committee
membership
Audit Committee
Chairmanship
Independent Director
(b)
120,000
30,000
5 000
(c)
30 000
(c)
Non independent Director
(d)
N/A
10,000
N/A
N/A
TOTAL COMPENSATION APPROVED BY THE SHAREHOLDERS’ MEETING: €450,000
(a)
It should be noted that the table above presents exclusively the compensation attributable to the mandates as Directors. It does not include any compensation that may
be awarded for other mandates exercised within the Group.
(b)
Payment subject to an annual presence at 100%, failing which the amount is calculated in proportion to the annual presence.
(c)
For each Committee membership, annually.
(d)
Fixed payment not subject to presence condition.
REPORT ON CORPORATE GOVERNANCE
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ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
37
CONTENTS
1
2
3
4
5
6
7
8
9
2.4.1.2.
Chief Executive Officer’s
remuneration policy applicable
in 2023 financial year
/ Principles of remuneration policy
In accordance with Article L. 22-10-8 of the French Commercial
Code, the compensation policy for corporate officers must be in line
with the Company’s corporate interests, contribute to its
sustainability and be part of its business strategy. To this end, the
Company’s
compensation
policy
establishes
a
competitive
compensation framework, adapted to the strategy and the context
of the Company and notably aims at promoting its performance
and competitiveness over the medium and long term.
The principles and criteria governing the remuneration policy of the
executive corporate officers and amounts were determined by the
Board
of
Directors
upon
the
recommendation
of
the
Compensation, Nomination and Governance/CSR Committee during
its Meeting dated February 3
rd, 2023 in order to be aligned with the
corporate interest.
This compensation policy also contributes to the sustainability of
the Company and is part of its business strategy insofar as it takes
into account the performance of the Company in the calculation of
the variable compensation. Indeed, this remuneration policy must
remain consistent with the Company’s performance, while ensuring
that the objectives of the executives are aligned with the Company’s
medium-term strategy and take into account the interests of
shareholders.
This remuneration policy has been established in accordance with
the principles of completeness, balance between the elements of
remuneration, benchmark, consistency, readability of the rules,
measurement and transparency (R.16) such as defined in the
Middlenext Code with the exception of the use of non-financial
criteria.
In accordance with the provisions of Article L. 22-10-8, III, paragraph
2 of the French Commercial Code, in the event of exceptional
circumstances, the Board may, on the recommendation of the
Compensation, Nomination, Governance and CSR Committee,
depart from the application of the compensation policy if such
departure is temporary, consistent with the Company’s interest and
necessary to ensure the Company’s continuity or viability, provided
that such exceptional circumstances:
■Are due to external events beyond the control and/or decision of
the Company;
■May have an impact on predefined Indicators prior to such
circumstances; and
■That the Company will have done everything possible to reduce
the impact, if any, on such Indicators.
For example, a major event impacting the industry as a whole or a
change in accounting method imposed by law could lead the Board
to use its discretionary power to make temporary adjustments to
certain existing compensation components, which it deems
necessary to ensure consistency between the performance of the
compensation of the Executive Officer(s) and that of the Company
in accordance with the principles of this compensation policy. In
accordance with the provisions of Article L. 22-10-8, II, paragraph 1,
the Board shall assess whether the adjustments thus made
constitute one or more significant changes to the remuneration
policy requiring a vote at the Shareholders' Meeting. If so, the use
of such a waiver by the Board would relate exclusively to the
elements of annual or long-term variable compensation, as defined
by the Board of Directors on the recommendation of the
Committees in accordance with the compensation policy, and would
result in:
■Modification of the levels of the thresholds, targets and/or
ceilings of the Performance Conditions conditioning the
acquisition
and/or
payment
in
cash
of
the
variable
compensation, upwards or downwards, if necessary in
compliance with the resolutions relating to the Share Plans
voted by the General Meeting;
■The adaptation of the scope and/or the methodology for
calculating an Indicator;
■The elimination of an Indicator that has become inapplicable or
its replacement in the event of an unforeseen and sudden
change linked to an external event, it being understood that any
new Indicator would be accompanied by demanding objectives
linked to the Group’s value creation objectives;
■The adjustment of the weight of the Indicators maintained in the
event of the suppression of an Indicator if the preceding point
occurs.
Thus, the use of such a waiver would not allow an increase in the
value of the target and maximum amounts to be paid or allocated.
For the 2021 financial year, the General Assembly held on June 22,
2022 approved by 84.4% of the votes the compensation policy
applicable to the Chief Executive Officer and by 84.4% of the votes
the compensation policy for the 2022 financial year.
Independently of the compensation policy, the Company covers or
reimburses the travel expenses (transport and accommodation) of
the corporate officers.
/ Remuneration structure
The Chief Executive Officer’s remuneration is structured as follows:
■A fixed annual part determined based on the level and
complexity of responsibilities, experience in the position and
length of service in the Group, as well as practices observed in
groups or companies of similar size;
■A variable annual part representing a target ratio of 62.5% of the
fixed remuneration: it is subject to an assessment based
exclusively on quantitative criteria related to the performance of
the Group (growth and profitability). These objectives are set at
the beginning of the year by the Board of Directors on the
recommendation of the Compensation, Nomination and
Governance/CSR Committee and aligned with the strategic plan
and the current year’s budget. The variable compensation is
assessed
by
the
Board
of
Directors
following
the
recommendation of the Compensation, Nomination and
Governance/CSR Committee at the end of the year. As regards
variable compensation, the Compensation, Nomination and
Governance/CSR Committee proposes the quantifiable criteria
to be taken into account and sets:
• a threshold below which the variable compensation is not
paid,
• a target that allows for the allocation of 100% of the
compensation provided for under the criterion.
The reconciliation between achievements and the objective,
broken down into threshold and target, constitutes the
performance evaluation method;
In accordance with Article L. 225-100 of the French Commercial
Code, the payment of variable or exceptional remuneration is
subject to the prior approval of this remuneration by the
Shareholders’ Meeting;
2
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
■A long term incentive compensation linked to qualitative and
financial performance over the long term. This can take the form
of one or more of the following financial instruments: Stock
option or free shares.Pursuant to Articles L. 225-185 and
L. 225-197-1, II of the French Commercial Code, the Board sets
the number of Shares resulting from the exercise of Stock
options plans or the definitive acquisition of free shares that
each Executive Director is required to hold in registered form
until the expiry of his or her corporate mandate. This percentage
is set by the Board, on the recommendation of the
Remuneration, Nomination, and Governance/CSR Committee,
when new stocks options plans or free shares plans are
implemented for Executive Directors.
Cash compensation for 2023
■A fixed part established at €400 000 ($400 thousand at budget
rate); This amount was determined by the Board of Directors in
its February 27
th, 2023 Meeting, on the recommendation of the
Compensation, Nomination and Governance/CSR Committee
and in alignment with compensation paid to executive officers
for similar companies;
■A variable part established at €250 000 ($250 thousand at
budget rate) on 100% quantitative criteria related to growth
(50%)
and
profitability
(50%).
In
the
context
of
its
transformation, the Board of Directors has chosen to focus the
compensation of the Chief Executive Officer on these financial
performance criteria in alignment with the objectives of the 3-
year strategic plan which refer to the growth and profitability of
the Company;
These criteria do not take into account over-performance and
are therefore limited to 100% target achievement and are
aligned with those of the Executive Leadership Team (ELT) and
are calculated as follows:
• 50% on Group profitability (Adjusted EBIT) - In order to target
an improvement in profitability, the trigger point is set based
on the 2022 result,
• 50% on Group revenue growth - In order to aim for an
improvement in performance, this only applies in the case
where the profitability trigger applies and is based on revenue
growth with the revenue for the financial year 2022 as the
threshold.
Criteria
Nature
Threshold and cap
Amount of
variable
compensation (€)
As a % of annual
variable
compensation
As a % of annual
fixed
compensation
Group profitability
(Adjusted EBIT)
quantifiable
Threshold: Adjusted EBIT
2022
Cap: 100%
€125,000
50%
31.25%
Group revenue growth
quantifiable
Threshold: Adjusted EBIT
2022 + Revenue 2022
Cap: 100%
€125,000
50%
31.25%
TOTAL
€250,000
100%
62.50%
Long-term compensation
Long-term incentive plans are subject to a condition of presence
over time and to performance conditions meeting objectives set in
line with the Group’s strategic plan.
For 2023, and exceptionally, no long-term incentive plans are
planned for the Chief Executive Officer, as the 2022 plan was
implemented for 18 months as part of a change in the seasonality
of the grant period.
Exceptional compensation
Very specific circumstances (for example because of their
importance for the Company, the involvement they require and
the difficulties they represent) could give rise to exceptional
remuneration granted to executive corporate officers. The award of
such remuneration would be exceptional, motivated and justified by
the Board. Its payment would be subject to the approval of the
Shareholders’ Meeting.
Benefits in kind
Benefits in kind include a Company car or equivalent allowance.
Other components of the executive corporate
officers’ compensation
Severance pay
No executive corporate officer of the Company receives severance
pay.
Non-compete clause
No executive corporate officer has a non-compete clause in his
corporate office.
Supplementary pension plan
No executive corporate officer has a supplementary pension plan
other than mandatory pension plans.
Health benefits and reimbursement scheme
The executive corporate officers of the Company benefit from the
pension plan and reimbursement of health expenses applicable to
all employees.
Non-combination of employment contract
and corporate office
At the time of appointment to the position of executive corporate
officer, it is decided to suspend any existing employment contract
with the Company for the duration of the office.
As of the date of this Universal Registration Document, there is no
employment contract between the Chief Executive Officer and
the Company.
REPORT ON CORPORATE GOVERNANCE
2
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ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
39
CONTENTS
1
2
3
4
5
6
7
8
9
Summary table of the Chief Executive Officer’s compensation
________
Compensation elements
Comments
Fixed annual compensation
Determined by the Board of Directors on the recommendation of the Compensation,
Nomination and Governance/ CSR Committee (taking into account in particular the
responsibilities exercised, experience, external and internal comparisons)
Annual variable compensation
Amount:
■Caped to 62.5% of the annual fixed compensation on achievement of objectives.
Criteria:
■For 100% on quantifiable objectives (50% on Growth and 50% on profitability);
■Payment conditional upon approval by a General Meeting of the compensation
elements.
Deferred variable compensation
Not applicable
Multi-year variable compensation
Not applicable
Exceptional compensation
Applicable, by decision of the Board of Directors, in very special circumstances.
Payment conditional on approval by an Ordinary General Meeting of the compensation
elements
Stock options, free shares or any other long-term
compensation
Eligibility for long-term incentive plans set up by the Group’s management. These plans
include a presence condition and qualitative or quantitative performance conditions.
Obligation to retain 50% of the shares effectively granted in this context throughout the
term of office
Compensation mentioned in Article L.22-10-14
of the French Commercial Code
Applicable as a non-independent director
Other benefits of any kind
Flat rate allowance according to internal policy
Severance pay/change of function
Not applicable
Non-competition indemnity
Not applicable
Supplementary pension indemnity
Not applicable
2
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
2.4.2. Compensation due to Directors for financial year
ended on December 31, 2022
This paragraph describes, in application of the compensation policy approved by the General Meeting of 28 June 2022 (17
th ordinary
resolution), the compensation and benefits paid (or to be paid) in respect of the financial year 2022 to the members of the Board of Directors
as a result of their corporate office.
Summary table of compensation and other components of compensation
due to non-executive corporate officers (Table 3 of AMF nomenclature)
________
Compensation
Non-executive corporate officers
Amounts allocated
for 2022 financial
year
Amounts paid
for 2022 financial
year
(a)
Amounts allocated for
2021 fiscal year
Amounts paid for
2021 fiscal year
(a)
Alex Davern
(b)
■Compensation as Director
172,000
—
171,722
19,125
■Other compensation
N/A
N/A
N/A
N/A
Éric d’Hotelans
■Compensation as Director
44,000
—
36,000
36,000
■Other compensation
N/A
N/A
N/A
N/A
Véronique Jacq
■Compensation as Director
33,000
—
37,944
37,944
■Other compensation
N/A
N/A
N/A
N/A
Rajani Ramanathan
■Compensation as Director
56,000
—
35,722
35,722
■Other compensation
N/A
N/A
N/A
N/A
Yves de Balmann
■Compensation as Director
38,000
—
33,000
33,000
■Other compensation
N/A
N/A
N/A
N/A
Patrice Soudan
■Compensation as Director
66,000
—
6,167
6,167
■Other compensation
N/A
N/A
N/A
N/A
Charles-Helen des Isnards
(c)
■Compensation as Director/
Observer
24,000
—
24,427
24,427
■Other compensation
N/A
N/A
N/A
N/A
TOTAL
■Compensation as Director
433,000
–
369,982
369,982
■Other compensation
(d)
N/A
N/A
114,305
114,305
(a) Before taking into account the withholding tax.
(b) Alex Davern, Chairman of the Board from February 8, 2021.
(c)
Charles-Helen des Isnards was Board member until February 8, 2021, when he resigned from his mandate and became Board Observer.
(d) Concerns Alain de Rouvray for 2021
For 2022 financial year, the compensation of non-executive corporate officers amounts to €433,000. In addition, the compensation allocated
to the executive corporate officer due to their mandate as Director, respectively €10,000 for Cristel de Rouvray (see 2.4.3.1.2); have to be
included. Consequently, out of the total compensation package of €450,000 approved by the General Meeting of June 22, 2021 (unchanged in
2022 and 2023), a total amount of €443,000 was allocated.
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2
3
4
5
6
7
8
9
2.4.3. Compensation to the executive corporate officers
The following tables are prepared in accordance with the
recommendation No. 2021-02 of the French Stock Market Authority
(Autorité des Marchés Financiers – AMF). They detail the amounts of
remuneration and benefits paid, as well as the amounts due for the
financial year ended December 31, 2022, where applicable, to the
Chairman of the Board of Directors and the Chief Executive Officer.
It should be noted that the remuneration of Alex Davern, Chairman
of the Board of Directors since 8 February 2021, is solely in respect
of this mandate and that he does not receive any other
remuneration (see section 2.4.1.1).
2.4.3.1.
Summary table of compensation and stock options granted to each corporate
officer (Table 1 of AMF nomenclature)
(In €)
2022
2021
Alex Davern
Chairman of the Board of Directors
Compensation due for the year (detailed in 2.4.1.1 and 2.4.2)
172,000
171,722
Value of multi-year variable compensation granted during the year
None
None
Value of stock options granted during the year
None
None
Value of free shares granted during the year
None
None
Value of other long-term compensation plans
None
None
Cristel de Rouvray
CEO
Compensation due for the year (detailed in 2.4.3.1.2 below)
500,862
509,022
Value of multi-year variable compensation granted during the year
None
None
Value of stock options granted during the year
635,473
357,476
Value of free shares granted during the year
None
None
Value of other long-term compensation plans
None
None
2.4.3.2.
Summary table of compensation to each corporate officer
(Table 2 of AMF nomenclature)
It should be noted that the remuneration of Alex Davern, Chairman of the Board of Directors since 8 February 2021, is solely in respect of this
mandate and that he does not receive any other remuneration (see section 2.4.1.1).
Cristel de Rouvray
CEO since February 1, 2019
(In €)
2022
2021
Amount due
Amount paid
Amount due
Amount paid
Fixed compensation
365,633
365,233
319,679
319,679
Annual variable compensation
114,260
123,519
123,519
Multi-annual variable compensation
—
—
—
—
Exceptional compensation
45,685
45,685
Compensation as Director
10,000
10,000
10,000
Benefits in kind
10,969
10,969
10,139
10,139
TOTAL
500,862
376,202
509,022
509,022
2.4.3.3.
Summary table of compensation and other components of compensation
due to Directors (Table 3 of AMF nomenclature)
Please refer to section 2.4.2 above of the Universal Registration Document.
2
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
2.4.3.4.
Share subscription or purchase options granted to each corporate officer
by the Company and any Group company during 2022 financial year
(Table 4 of AMF nomenclature)
Name of the executive
corporate officer
Plan No.
and date
Type of options
(purchase or
subscription)
Value of options
on the method
used for the
consolidated
financial
statements
Number of
options
granted
during the
year
Exercise
price
(in €)
Exercise
period
Cristel de Rouvray
CEO
No. 21 bis*
06/28/2022
Purchase
635 473€
36000
64.73
8 years
Share subscription or purchase options granted during the year to each executive corporate officer
by the Company and any Group company
*
100% of the plan is linked to performance conditions :
■
60% on qualitative conditions:
•
Achievement of the leadership team criteria as per annual assessment done by the Compensation, Nomination, Governance/CSR Committee before each
Exercisable Date.
•
Achievement of the transformation plan as per annual assessment done by the Compensation, Nomination, Governance/CSR Committee before each
Exercisable Date.
■
40% on quantitative conditions linked to the 3 year plan One ESI – Focus to grow (https://www.esi-group.com/company/oneesi-2024-focus-to-grow).
2.4.3.5.
Share subscription or purchase options exercised to each corporate officer
by the Company and any Group company during financial year ended
on December 31, 2022 (Table 5 of AMF nomenclature)
Share subscription or purchase options exercised during the year to each executive corporate officer
by the Company and any Group company
Name of the executive corporate officer
Plan No. and date
Number of options
exercised during
the year
Exercise price
Cristel de Rouvray
CEO
None
2.4.3.6.
Free shares allocated to each corporate officer during financial year
ended on December 31, 2022 (Table 6 of AMF nomenclature)
Free shares allocated to each executive corporate officer
Free shares allocated by the Shareholders’
Meeting during the year to each executive
corporate officer by the Company and any
Group company
Plan No.
and date
Number
of shares
allocated
during
the year
Value of shares
on the method
used for the
consolidated
financial
statements
Acquisition
date
Availability
date
Performance
conditions
Cristel de Rouvray
CEO
None
2.4.3.7.
Free shares vested to each executive corporate officer during financial year
ended on December 31, 2022 (Table 7 of AMF nomenclature)
Free shares allocated vested to each
executive corporate officers
Plan No. and date
Number of shares
vested available during
the year
Acquisition
conditions
Cristel de Rouvray
CEO
None
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2
3
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5
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7
8
9
2.4.3.8.
History of share subscription or purchase option allocations
(Table 8 of AMF nomenclature)
Date of Shareholders’ Meeting
Plan No. 10:
06/26/2012
Plan No. 17:
07/24/2014
Plan No. 19:
06/29/2017
(a)
Plan No. 20:
25/06/2020
Plan No. 21:
25/06/2020
Date of the Board of Directors’ Meeting(s)
12/19/2012
02/07/2014
03/26/2015
07/22/2015
07/22/2015
03/11/2016
05/05/2017
07/18/2018
02/01/2019
12/18/2019
09/10/2021
28/06/2022
Number of options allocated
180,000
37,400
89,735
0
69,150
Of which:
■Cristel de Rouvray, CEO
n/a
n/a
20,000
0
60,000
Start date of exercise period
2016 to 2019
2017 to 2021
2021 to 2022
2022 to 2030
Expiration date
2020 to 2025
2023 to 2026
2026 to 2027
Exercise price (in €)
27.82; 24.42;
21.66; 27.17
27.17; 23.35;
50.92
42.97; 27.04;
29.12
60.47
64,73
Type of option
Subscription
Subscription
Subscription
Subscription
Purchase
Option exercised
69,675
15,900
3,149
Subscription or purchase options cancelled
or exercised
110,325
13,000
59,461
Subscription or purchase options
as at end of financial year
0
8,500
27,125
69,150
(a)
All plans, with the exception of Plan 19 ter, are subject to performance conditions.
/ Allocation of share subscription
and purchase options
The allocation of options during 2022 is linked to Cristel de Rouvray
and an employee of the company, as shown above in the table.
/ Exercise of share subscription options
The Board of Directors has noted during its Meeting of February 27,
2023, that the number of new shares issued as a result of the
exercise of options during 2022 financial year amounted to
11,475 shares with a nominal value of €3 representing an increase
in the share capital of the Company of an amount of €34,425, which
increased from €18,192,423 to €18,226,848.
2.4.3.9.
Share subscription or purchase options granted to the top 10 non-corporate
officers beneficiary employees and options exercised by them during financial
year ended on December 31, 2022 (Table 9 of AMF nomenclature)
Share subscription or purchase options granted
to the top 10 non-corporate officers beneficiary
employees and options exercised by them
Total number of options granted/
shares subscribed or purchased
Weighted
average price
(in €)
Plan No.
Options granted during the year to the ten employees
of the Company and its Group which represent
the largest number of options allocated
9,150
64.78
21
Options held and exercised during the year by the ten
employees of the Company and its Group which represent
the largest number of options purchased or subscribed
10,938
37.53
10, 17 & 19
2
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
2.4.3.10. History of free shares allocations (Table 10 of AMF nomenclature)
Date of Shareholders’
Meeting
Plan No. 6:
07/21/2016
Plan No. 7:
07/21/2016
Plan No. 8:
07/21/2016
Plans No. 9,
9 bis, 9 ter,
9 quater,
9 quinquies,
9 sexies,
9 septies:
07/18/2018
Plans No. 10,
10 bis, 10 ter,
10 quater,
10 quinquies,
10 sexies,
10 septies,
10 novies:
25/06/2020
Plan No. 11,
11 bis, 11 ter,
11 quater,
11 quinquies,
11 sexies,
11 septies,
11 octies
Date of the Board of Directors’
Meeting
07/21/2016
12/23/2016
08/01/2017
07/18/2018
07/18/2019
12/18/2019
19/03/2020
25/06/2020
10/06/2021
04/10/2021
19/11/2021
28/06/2022
17/11/2022
Number of shares allocated
25,000
2,275
9,000
58,666
59,674
81,821
Of which
■Cristel de Rouvray, CEO
n/a
n/a
n/a
n/a
n/a
N/A
Date of delivery
From
07/21/2018
12/23/2018
From
08/01/2019
From
07/18/2020 from 11/06/2023 from 28/12/2023
Term of vesting period
From
07/21/2020
12/23/2020
From
08/01/2021
From
07/19/2022
From
11/06/2023
From
28/06/2024
Number of shares delivered
25,000
1,962
9,000
39,443
5,000
0
Number of shares cancelled
or expired
0
313
0
13,067
18,712
129
Remaining shares as at end of
Fiscal Year
0
0
0
6,166
35,962
81,692
2.4.3.11. Summary table of benefits or advantages to corporate officers
(Table 11 of AMF nomenclature)
Employment contract
Supplemental
pension plan
Compensation or benefits
due or likely to be due
following termination or
position change
Compensation
relating to a non-
competition
clause
Executive corporate officers
Yes
No
Yes
No
Yes
No
Yes
No
Cristel de Rouvray
CEO
×
×
×
×
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9
2.4.3.12. Equity Ratio between the level of compensation of corporate officers
and the average and median compensation of employees of the Company
(Article L. 22-10-9-(6) and (7) of the French Commercial Code)
2022
(b)
2021
(b)
2020
(b)
2019
(a)(b)
2018
(b)
Performance of the Company
Net results of the Company (in € million)
15.4
(18.5)
1.4
(2.82)
(5.55)
Compensation of employees
Average compensation of employees
73,545
66,679
65,776
59,726
60,526
(Evolution compared to the previous year)
10,3%
1.4%
10.1%
(1.3%)
Median compensation of employees
59,674
53,562
54,603
51,605
51,443
(Evolution compared to the previous year)
11,4%
(1.9%)
5.8%
0.3%
CEO (Cristel de Rouvray from 2019 to 2022
and Alain de Rouvray in 2018 )
Compensation
500,862
509,022
365,652
392,256
548,533
(Evolution compared to the previous year)
(1,6%)
39.2%
(6.8%)
— %
Compensation ratio compared to average compensation
of employees
(d)
6.81
7.63
5.56
6.57
9.06%
(Evolution compared to the previous year)
(10,8%)
37.3%
(15.4%)
— %
Compensation ratio compared to the median
compensation of employees
(e)
8.39
9.50
6.70
7.60
10.66%
(Evolution compared to the previous year)
(11,7%)
41.9%
(11.9%)
— %
Compensation ratio compared to SMIC
(c) (f)
25.37
27.13
*
2019 revenue 12-month comparable (January to December) to ensure comparability of data.
(a)
For 2019, calculation based on total fixed compensation and benefits in kind – due to the 11-month fiscal year, reconstitution of a prorata temporis over 12 months
to maintain the comparability of the ratios presented.
(b)
Executive compensation includes base salary, variable compensation, exceptional bonuses, benefits in kind and Directors fees as part of the compensation paid.
(c)
SMIC: minimum salary in France at 18655€ as of January 2021 and 19074€ as of October 2021, 19237,4€ as of January 2022, 19747€ as of May 2022, 20147,4€ as
of August 2022.
(d)
Average compensation of employee: average gross salary recalculated on a full year basis of French employees who worked more than 180 days on the year.
(e)
Median compensation of employees: median gross salary recalculated on a full year basis of French employees who worked more than 180 days on the year.
(f)
Gross compensation of the CEO/ French minimum salary on 1820 hours basis.
2
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CONTENTS
2.4.3.13. Summary table of compensation to corporate officers
The General Meeting to be held on June 28, 2022 will be called upon to approve the fixed, variable and exceptional components constituting
the total compensation and benefits of all kinds paid or granted with respect to the financial year ended on December 31, 2021 to the
corporate officers of ESI Group pursuant to Article L. 225-100 of the French Commercial Code.
Compensation payable or granted for 2022 financial year
to Cristel de Rouvray, Chief Executive Officer
________
Components
of the compensation
Amount or
accounting
valuation
submitted for
approval
(in €)
Description
Fixed compensation
365,633
The fixed compensation payable to Cristel de Rouvray as Chief Executive Officer
and for her other mandates exercised within the Group in respect of 2022
financial year amounts to €365,633.
Variable annual compensation
114,260
Variable compensation represents a target ratio of 62.5% of fixed
compensation: it is subject to an evaluation based exclusively on quantitative
criteria linked to the Group’s profitability and revenue growth:
■50% on Group profitability – The rate of achievement of this criterion
is 100%, i.e. a remuneration of €114,260;
■50% on the growth of the Group’s revenues - The rate of achievement of this
criterion is 0%, i.e. a remuneration of 0 euros.
Long term or deferred compensation
No long term of differed compensation was granted by the Board of Directors.
Exceptional compensation
The Board of Directors has not granted any exceptional compensation for the
year 2022.
Compensation for Director’s mandate
10,000
Aligned with Board member compensation policy for Executive Directors.
Stock-options and performance shares
635,473
At its meeting of June 28, 2022, the Board of Directors decided to grant a
maximum of 36,000 stock options subject to presence and performance
conditions:
■For 40% of these stock options, performance is linked to the achievement of
combined objectives of average revenue growth between FY20 and FY24
(proforma and constant rates) and the adjusted EBIT margin rate in FY24;
■For 60% of these stock options, performance is linked to the achievement of
annual qualitative targets reviewed by the Compensation, Nomination,
Governance and CSR Committee:
• Achievement of executive team management objectives (ELT),
• Achievement of transformation plan objectives.
Benefits in kind
10,969
The benefits in kind include an allowance for vehicle of €10,969
Severance pay
n/a Cristel de Rouvray is not a beneficiary of any severance pay.
Retirement compensation
n/a Cristel de Rouvray is not a beneficiary of any retirement compensation.
Non-compete compensation
n/a Cristel de Rouvray is not a beneficiary any non-compete compensation.
Supplementary retirement plan
n/a Cristel de Rouvray is not a beneficiary of any supplementary retirement plan.
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2
3
4
5
6
7
8
9
2.5.
ADDITIONAL INFORMATION IN RESPECT
OF CORPORATE GOVERNANCE
2.5.1. Regulated agreements and commitments
and related party transactions
2.5.1.1.
Regulated agreements
and commitments
The law, the Company's Articles of Association and the Board of
Directors’ internal rules organise the control of regulated
agreements. Proposed new agreements are examined prior to their
conclusion. In addition, the Board of Directors examines each year,
at the beginning of the financial year, the purpose and application
of the agreements that are to continue in effect. It verifies whether
they still meet the criteria that led it to give its initial approval.
The Statutory Auditors’ special report on the regulated agreements
and commitments referred to in Articles L. 225-38 et seq. of the
French Commercial Code for 2022 financial year is set out under
section 2.6 below.
During the 2022 fiscal year, no new agreement gave rise to the
procedure provided for in Articles L. 225-38 et seq. of the French
Commercial Code mentioning the presence of a new regulated
agreement during the year.
To the best of the Company’s knowledge, there are no agreements
and regulated commitments that produced any effect during the
financial year or that are currently in force.
2.5.1.2.
Transactions with related parties
Details of transactions with related parties can be found in note 11
to the consolidated financial statements in chapter 6 of this
Universal Registration Document.
2.5.2. Control of current agreements concluded under normal conditions
The Board of Directors assesses whether the agreements relating to current operations and concluded under normal conditions meet these
conditions. The Board has adopted the principle of an annual assessment.
2
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CONTENTS
2.5.3. Delegations of authority
At the date of this Universal Registration Document, the Company’s
share capital amounted to €18,226,848. It was divided into
6,075,616 shares with a nominal value of €3 each, all of the same
class, fully paid up.
Apart from the share subscription or purchase option plans and the
allocation of bonus shares described in section 2.4.2.1.8, there is no
financial instrument to access the Company’s share capital.
Table summarizing currently valid delegations granted to the Board of Directors
and use of such delegations during 2022 financial year
______
Combined General Meeting of June 25, 2020
Resolution 17
Grant of stock subscription
options
38 months August 2023
Not to exceed 3% of the Company’s
share capital at the date of the
Combined General Meeting, i.e.
180,000 shares
Options granted
at the date of this
Universal
Registration
Document: 0
Options
remaining:
180,000
Resolution 18
Grant of stock purchase options
38 months August 2023
Not to exceed 5% of the Company’s
share capital at the date of the
Combined General Meeting, i.e.
300,000 shares
Options granted
at the date of this
Universal
Registration
Document:
69,150
Options
remaining:
230,850
Combined General Meeting of June 22, 2021
Resolution 23
Increase of the share capital by
issuing shares reserved for
employees enrolled in the
employee savings plan
26 months August 2023
Not to exceed 2% of the Company’s
share capital
None
Combined General Meeting of June 28, 2022
Resolution 18
Company’s purchase of its own
shares
(a)
18 months December 2023
Not to exceed 10% of the
Company’s share capital
None
Resolution 19
Grant of free shares to eligible
employees and executive
corporate officers of the Company
and affiliated companies
(a)
38 months August 2025
Not to exceed 120,000 shares
representing 2% of the share capital
as of the date of the Combined
General Meeting
Free shares
granted during
the year 2022:
81,821
Free shares to be
allocated: 38,179
Resolution
number
Purpose
Term
Expiration
date
Maximum
Used in 2022
and available
as at December
31, 2022
(a)
A new delegationwill be submitted to the vote of the Shareholders’ Meeting on June 29, 2023 for 60 000 shares.
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7
8
9
2.5.4. Provisions of the articles of association concerning the participation
of shareholders in General Meetings
General Meetings
(Article 19 of the articles of association)
In accordance with Article 19 of the articles of association and
legislation in force, decisions are made collectively by shareholders
in General Meetings classified as either Ordinary or Extraordinary
General Meetings.
The procedures for convening and holding General Meetings are
governed by French law. Meetings are held at the head office or at
any other location indicated in the Meeting notice.
Ordinary General Meetings are convened to make all decisions that
do not require amendments to the articles of association.
They occur at least once a year, within six months from the end of
the previous financial year.
Only Extraordinary General Meetings have the power to amend any
provision set forth in the articles of association. However, such
Meetings may not increase the obligations of shareholders, except
in the event of transactions stemming from any valid consolidation
of shares.
If there are multiple categories of shares, the rights attached to the
shares of a certain category may not be changed without the
approval of an Extraordinary General Meeting open to all
shareholders and, in addition, without further approval from a
Special Meeting open only to those shareholders holding shares
belonging to the category in question.
All shareholders are entitled, upon presentation of proof of their
identity, to take part in Meetings by attending them in person, by
video
conference
or
by
other
means
of
electronic
telecommunication or transmission, or by returning the mail-in
ballot or designating a proxy.
The right to attend or be represented at the General Meeting is
subject to shares being recorded for accounting purposes in the
name of the shareholder or the intermediary registered on behalf
of the latter, by 12:00 am Paris time, two working days prior to the
General Meeting:
■Either in the registered share account kept by the Company;
■Or in bearer share accounts kept by the authorized
intermediary.
A participation certificate must be established by the authorized
intermediary on the basis of this registration and attached to the
mail-in ballot/proxy form or the access card application submitted
in the name of the shareholder.
In accordance with the conditions set forth above, the legal
representatives of shareholders deemed legally incompetent and
individuals representing legal persons that hold shares in the
Company may take part in General Meetings, regardless of whether
or not they are shareholders themselves.
Proxy forms and mail-in ballots must be prepared and sent out in
accordance with legislation in force.
An attendance sheet is filled out for each Meeting. This attendance
sheet must be duly signed by the shareholders present and by the
proxies and must be certified as accurate by the officers of the
Meeting.
General Meetings are chaired by the Chairman of the Board of
Directors and, in the absence thereof, by the Board member
appointed to replace him or her.
The two shareholders present at the Meeting who represent the
largest number of shares, either on their own behalf or as proxies,
are appointed to serve as scrutineers, provided that they accept the
responsibility.
The officers of the Meeting, thus designated, are responsible for
appointing a secretary who need not be a shareholder.
Quorum and majority
(Article 20 of the articles of association)
The Ordinary General Meeting cannot validly conduct business
when first convened unless the shareholders present or
represented account for at least one-fifth of shares with voting
rights.
When convened a second time, no quorum is required.
The Meeting issues decisions by a majority vote of the shareholders
present or represented.
The Extraordinary General Meeting cannot validly conduct business
unless the shareholders present or represented account for at least
one-fourth of shares with voting rights when first convened, and
one-fifth when convened a second time. If this quorum is not
attained, the second General Meeting may be postponed for a
maximum of two months from the date at which it was initially
convened.
The Extraordinary General Meeting issues decisions by a two-thirds
majority vote of the shareholders present or represented.
Special General Meetings cannot validly conduct business unless
the shareholders present or represented account for at least half of
shares with voting rights when first convened, and one-fourth when
convened a second time. If this quorum is not attained, the second
General Meeting may be postponed for a maximum of two months
from the date at which it was initially convened, the one-fourth
quorum remaining necessary.
Special General Meetings issue decisions by a two-thirds majority
vote of the shareholders present or represented.
2
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CONTENTS
2.5.5. Factors that may have an impact in the event of a public offering
Pursuant to Article L. 225-37-5 of the French Commercial Code, the
following points are likely to have an impact on the public offering:
■The structure of the share capital as well as direct or indirect
investments of which the Company is aware and all such
information is included in section 8.2.5 of this Universal
Registration Document under the heading “Change in the
breakdown of the Company’s share capital over the past three
financial years”;
■There are no statutory restrictions on the exercise of voting
rights and share transfers;
■To the Company’s knowledge, there are no agreements or other
commitments
entered
into
between
shareholders
(see
section 8.2.5);
■There are no securities giving special control rights other than
double voting rights stipulated in Article 9 of the articles of
association and mentioned in section 8.1.2 of this Universal
Registration Document under the heading “Double voting rights
(Article 9 of the articles of association)”;
■Voting rights attached to ESI shares with regard to the employee
savings plan are exercised by the ESI FCPE;
■The rules for appointing and removing members of the Board of
Directors are those of common law;
■Concerning the powers of the Board of Directors, current
authorizations are described in the table summarizing powers
delegated with regard to share redemption and capital increases
in section 2.5.2 of this Universal Registration Document;
■Any amendments to ESI Group’s articles of association are made
in accordance with legal requirements and regulations;
■There are no agreements entered into by the Company that are
modified or terminated in the event of a change of control of the
Company other than the syndicated loan agreement presented
in chapter 6, notes 7.1.2 and 7.4 of this Universal Registration
Document;
■There are no agreements providing for compensation in the
event of the departure of members of the Board of Directors.
REPORT ON CORPORATE GOVERNANCE
2
ADDITIONAL INFORMATION IN RESPECT OF CORPORATE GOVERNANCE
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1
2
3
4
5
6
7
8
9
2.6.
STATUTORY AUDITOR’S REPORT ON REGULATED
AGREEMENTS
This is a translation into English of a report issued in French and it is provided solely for the convenience of English-speaking users.
This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.
Annual General Meeting held to approve the financial statements for the year ended December 31, 2022
To the Annual General Meeting of ESI Group,
In our capacity as statutory auditors of your Company, we hereby present to you our report on related party agreements.
We are required to inform you, on the basis of the information provided to us, of the terms and conditions of those agreements indicated to
us, or that we may have identified in the performance of our engagement, as well as the reasons justifying why they benefit the Company.
We are not required to give our opinion as to whether they are beneficial or appropriate or to ascertain the existence of other agreements. It
is your responsibility, in accordance with Article R. 225-31 of the French Commercial Code (Code de commerce), to assess the relevance of these
agreements prior to their approval.
We are also required, where applicable, to inform you in accordance with Article R. 225-31 of the French Commercial Code (Code de commerce)
of the continuation of the implementation, during the year ended December 31, 2022, of the agreements previously approved by the Annual
General Meeting.
We performed those procedures which we deemed necessary in compliance with professional guidance issued by the French Institute of
Statutory Auditors (Compagnie nationale des commissaires aux comptes) relating to this type of engagement.
Agreements submitted for approval to the Annual General Meeting
We hereby inform you that we have not been notified of any agreements authorized and concluded during the year ended December 31,
2022 to be submitted to the Annual General Meeting for approval in accordance with Article R. 225-38 of the French Commercial Code
(Code de commerce).
Agreements previously approved by the Annual General Meeting
We hereby inform you that we have not been notified of any agreements previously approved by the Annual General Meeting whose
implementation continued during the year ended December 31, 2022.
Paris-La Défense, 17 March 2023
The Statutory Auditors
French original signed by
KPMG Audit
Département de KPMG S.A.
Stéphanie Ortega
Ernst & Young Audit
Pierre-Henri Pagnon
2
REPORT ON CORPORATE GOVERNANCE
STATUTORY AUDITOR’S REPORT ON REGULATED AGREEMENTS
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CONTENTS
3
RISKS AND RISK
MANAGEMENT
3.1.
RISK FACTORS
54
3.1.1.
Risk analysis and evaluation method
54
3.1.2.
Strategic and operational risks
54
3.1.3.
Digital risk
55
3.1.4.
Risk related to the environment
56
3.2.
INTERNAL CONTROL AND RISK MANAGEMENT PROCEDURES
57
3.2.1.
Control environment
57
3.2.2.
Internal control organization
59
3.2.3.
Risk management
60
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3.1.
RISK FACTORS
The Group has reviewed the major risks that could have a significant effect on its business, financial position or results. The data presented
below constitute the main risks for the Group. Non-specific risks are not detailed in this document.
3.1.1. Risk analysis and evaluation method
ESI’s risk management system is organized in five stages, according
to the methodology described below:
The risks listed on the following pages have been assessed
(Stages 2 and 3) in relation to their occurrence and their impact on
ESI’s activity. The combination of these two criteria makes it possible
to identify what is known as the “exposure level” (high, important,
medium, low), which then implies the implementation of measures
to control these risks (Stage 4).
In each category (table below), risk factors are listed in descending
order of importance, considering the probability of their
materialization and the estimated magnitude of their impact and
after taking into account the mitigation measures already
implemented by ESI.
Strategic and operational risks
■Concentration among top customers and industry sector
■Competition and differentiation
■Intellectual Property
■Alignment of Human resources
Digital risk
■Information security
Risks related to the environment in which the Group operates
■International environment, geopolitical, and regulatory risks
■Environment: Global Pandemic situation
3.1.2. Strategic and operational risks
3.1.2.1.
Competition (competitive edge),
differentiation
Risk identification and description: Simulation & Analysis is a
vibrant, high stakes market with consolidation and concentration of
competition. These larger actors have considerably higher growth
and profitability performance than ESI Group. This results in a
heightened need for ESI to clearly position itself and focus to grow
profitably. The competitive environment in the Virtual Prototyping
market and its concentration of competitors could be perceived as
a risk given the economic and/or technological power of larger
groups.
Risk Assessment:
■Impact: The competitive environment and the on going
concentration of players could impact our market position;
■Exposure level: Important.
Mitigation measures:
ESI is an historical actor developing its offer since 1973 and with
customers relations based on several decades of successful
business relations and with a growing recurring business over years
(91.3% on FY22 at the constant perimeter). ESI clearly outlines the
differentiators in its offering and positioning, focusing on the core
business in alignment with ONE ESI Focus to Grow Plan. It creates
more clarity and simplification of the offer around three lines of
business (Product Performance, Smart Manufacturing and Human
Centric), to increase the added value provided by chaining our
predictive physics capabilities, and to invest to win by aligning on
the core business. The level of ESI R&D investment in FY22 reached
33.3 % of total revenue.
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STAGE 2
Risk Analysis
STAGE 5
Risk Monitoring
& lifecycle control
STAGE 3
Risk Assessment
STAGE 4
Risk Mitigation
STAGE 1
Context & Risk
Identification
CONTENTS
3.1.2.2.
Intellectual property
Risk identification and description: Due to the nature of the high
added-value activities resulting from ESI’s ecosystem interactions
and its culture of innovation, the Company relies on its software,
which is its main asset to guarantee a source of income and
continuous growth. Despite the implementation of protection
systems, the Company may be exposed to risks such as
counterfeiting of specific products by individuals or companies,
claims to intellectual property rights and fraudulent use/
infringement of our technologies.
Risk Assessment:
■Impact: The counterfeiting/piracy of our products might lead to a
loss of revenue and incurring of legal costs to fight those risks.
To date, there is no ongoing major litigation for counterfeiting
activities;
■Exposure level: Important.
Mitigation measures:
ESI controls the intellectual property of codes developed in-house
for which ESI retains the ownership through the clauses on the
employment contracts, ad-hoc development agreements inside the
Group, and through the protection of codes via bailiff deposits. The
Group implements strong protection methods on its products and
uses best-in-class illegal use detection software associated with a
legal assistance service to prosecute infringers. In addition, ESI has
implemented the necessary contractual protection elements in our
relationship with customers and partners.
3.1.2.3.
Alignment of human resources
Risk identification and description: The Group’s success depends
in large part on its ability to attract, retain, and motivate quality
employees, with a constant focus on aligning their skills with the
Group’s needs and challenges. The ever-increasing volatility of skills
in the technology sector, and the changing expectations of the new
generation of candidates, could pose a risk to access particular skills
for the concerned business areas.
Risk Assessment:
■Impact: The non-access or disappearance of certain internal
knowledge on specific areas could represent a challenge to
maintain the necessary pace of innovation demanded by the
market;
■Exposure level: Important.
Mitigation measures:
ESI’s international implementation and his prominent acting role in
a vibrant technological market is an attractive element for new
talents. ESI implements retention and loyalty policies, by setting up
talent development plans and attractive compensation policy for
key people. ESI practices regular benchmarks on the working
conditions to maintain and improve our attractiveness for current
and new talents. ESI identifies the critical talents where it is required
to anticipate the knowledge sharing for key activities. ESI has
reinforced the expertise on the Talent Acquisition activities by
creating a dedicated centre of expertise, also boosting the
attractiveness by offering the right level of compensation through
better usage of salary benchmarking. ESI has improved the
development of competences based on a global training approach.
3.1.2.4.
Concentration among top
customers and industry sector
Risk identification and description: ESI Group is confronted with
the reality of managing some “key customers” with a significant
weight in terms of turnover and growth. These customers are
mainly part of the Automotive sector. The automotive industry is
massively investing (2.4B USD in 2021) in simulation and analysis
tools to meet the end users needs on new mobility (electrification,
light weighting and other ways of mobility).
Risk Assessment:
■Impact: The share of turnover achieved with the top twenty
customers is 50% of the Total FY22 Revenue;
■Exposure level: Medium.
Mitigation measures:
The Group works with industrial large organisation with long
production cycles, willing to work in partnership mode and to
stabilize their processes in the long term.
ESI seeks to create long term relationship with our customer base
to build strong and integrated business processes. For large
customers our software are totally embedded on the industrial
processes and any migration will take several years which will give
us the necessary time to acknowledge any impact on the company
revenue and react accordingly.
3.1.3. Digital risk
Risk identification and description: ESI’s value chain relies heavily
on an IT infrastructure that is of paramount importance in the
processing, transmission, and storage of data related to internal
and external operations. The Company may be exposed to
computer attacks of all kinds (viruses, fraudulent e-mails, phishing,
financial fraud, industrial espionage, etc.). The General Data
Protection Regulation (GDPR) is also integrated into the legal
requirements environment. ESI also seeks to comply with client
requirements
concerning
the
confidentiality,
integrity,
and
availability of information entrusted to the Group.
Risk Assessment:
■Impact: Failure to comply with security requirements including
client expectations concerning the confidentiality, integrity, and
availability of information entrusted to the Group could have
negative
consequences
on
long-term
relationships
with
customers and on ESI’s reputation. ESI, like many other
organizations, is in a situation of dealing regularly with
Cyberattacks, which thanks to the measures implemented were
either mitigated or contained;
■Exposure level: Medium
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Mitigation measures:
ESI relies on its Information Management System based on the
requirements of ISO 27001, which certification was achieved on
March 2022. The Group benefits from a TISAX (Trusted Information
Security Assessment Exchange) certification for several sites
(Germany, Czech Republic, and Spain). The setting up of a global
cyber insurance policy allows the Group to protect its activities while
reviewing and validating its internal systems and control points.
In addition, in 2022, ESI Group decided to appoint an External CISO
who is working hand in hand with the concerned teams to review
and strengthen the measures & initiatives implemented to mitigate
the Cybersecurity Risk.
3.1.4. Risk related to the environment
3.1.4.1.
International, geopolitical,
and regulatory environment
Risk identification and description: The global economic,
commercial, and social as well as geopolitical context may influence
the Group’s development. In particular, the economic context and
limited visibility may have an impact on customer investments and
lead to lengthened sales cycles. The Group may also face risks of
non-compliance with local laws and regulations restricting exports
of certain solutions and new reinforced rules on CSR subjects.
Risk Assessment:
■Impact: The increased tensions, in or between certain regions or
countries, could lead to the implementation of protective laws
and regulations in certain areas that would slow down the
deployment of our solutions. In the event of non-compliance, ESI
would face the penalties and sanctions laid down in those legal
texts. For the time being ESI Group has not seen its Sales Cycle
lengthen;
■Exposure level: Medium.
Mitigation measures:
The Group’s presence in many countries protects it from the
adverse effects of unfavourable local economic conditions. The
Group ensures compliance with Export Trade laws and regulations
as they evolve, when necessary as a way to ensure the following
external constraints will not impact our activity.
Trade:
■For EU: EU General Export Authorizations, Wassenaar Dual Use
and Munitions, EU Sanctions Programs, EU National Controls
(FR/ UK/DE), European Law, Other Trade-Related Regulations;
■For US: Administration Regulations (EAR), The Commerce Control
List (CCL), International Traffic in Arms Regulations (ITAR), Office
of Foreign Assets Control (OFAC), Federal Register Orders, Other
Trade-Related Regulation.
CSR: ESI has implemented during FY22 an initiative to be in
compliance with such as (CSRD (move from DPEF), Taxonomy,
Whistleblowing Decree, etc.).
3.1.4.2.
Environment: Global pandemic
situation
Risk identification and description: In the current context and
environment and specifically the Covid-19 crisis, it has been
necessary to keep adapting and transforming the operational
activities, in order to limit its influence on the development of the
Group. The Group put in place a crisis management system (see
section 3.2.3 related to Crisis management) enabling identification
of action plans and deployment of the necessary measures to
ensure the continuity of the activity while protecting the employees.
The health crisis created opportunities for increased engagement
with the customers in a different manner but also for bringing new
working methods to ensure the continuity of the operations.
Risk Assessment:
■External Impact: Resilience of ESI Group’s business model. The
latest published results showed our strengths to run our current
activities under these circumstances;
■Internal Impact: Acceleration of digitalization and process agility;
■Exposure level: Medium
Mitigation measures:
The health crisis created opportunities for increased engagement
with the customers in a different manner but also for bringing new
working methods to ensure the continuity of operations.
During 2022, ESI Group has pursued the implementation of the
project “NWoW” (New Ways of Working) which helps continuing
delivering our products and services whilst working differently.
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
3.2.
INTERNAL CONTROL AND RISK MANAGEMENT
PROCEDURES
3.2.1. Control environment
General organization
ESI is a multinational corporation that includes 19 subsidiaries (the
“subsidiaries”), 18 of which are based outside of France, as of the
date of publication of this document.
To ensure that business operations and management activities run
efficiently, that objectives are met and that the Group’s control
system is effective, executives are determined to harmonize the
operational rules of the subsidiaries. This also applies to internal
control activities and is reflected in the gradual standardization of
information systems and processes throughout the organization.
Given the current constraints, in particular regarding the size of the
subsidiaries, the availability human resources and regulations that
may differ from country to country, the Group’s structure has been
based on the following key factors:
■A global organisation around business activities with proper
delegation structure;
■A centralized organization to manage the Group’s business
activities;
■A limited number hierarchical levels to streamline decision-
making processes;
■A relatively small size for efficient communication among the
various departments.
The Company considers that internal control processes are
intended to provide reasonable assurance that the following
objectives are met (the principles implemented cannot provide an
absolute control of all risks):
■Ensuring that management activities and operations, as well as
employee conduct, are aligned with the guidelines set out by the
Company’s management and the operational departments
overseeing the various business activities and countries, as well
as with regards to any applicable laws and regulations and the
Company’s core values and internal rules;
■Anticipating and managing risks that stem from the Group’s
business activities and risks of error or fraud, especially in the
areas of accounting and finance;
■Verifying that the accounting, financial and management
information reported to corporate bodies, shareholders and
third parties accurately reflects the Company’s position and the
business situation.
Internal control bodies
/ Within the Company
The Board of Directors
The Board of Directors is responsible for the Company’s risk
assessment policies, implementation of an internal control system
suitable for managing these risks and initiatives to monitor the
effectiveness of this system. This policy features a system of checks
and procedures regarding financial management, as well as
operational and compliance monitoring. The Board of Directors is
supported by five Board committees to prepare the reviews and
decisions.
Leadership Team
The Leadership team oversees effective implementation of the
internal policies. The Leadership team gives strategic orientation
and makes the arbitration decisions concerning the allocation of
resources
in
order
to
ensure
the
Company’s
worldwide
development. The Team generally meets weekly.
Operational and corporate departments
The operational departments primarily oversee business processes
and manage projects. Their role is to ensure the implementation of
procedures to guarantee:
■Effective
business
processes:
identification
of
business
opportunities,
distribution
network,
partnerships,
responsiveness, assessment of potential economic benefits,
negotiation and signing of contracts, profitability monitoring;
■Effective project management: evaluation of technical feasibility,
team
management
and
leadership,
compliance
with
specifications, customer satisfaction tracking and customer
service.
The Support functions departments are responsible for formalizing
internal control procedures in their respective areas and
coordinating and applying these procedures. These departments
are the following:
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Administration and Finance Department
The
Administration
and
Finance
Department
handles
the
implementation of the internal control policy at its level by:
■Establishing the operations procedures for the internal financial
control system;
■Organizing financial control operations on different Group
activities, as well as the accurate transcription in the Group’s
accounts, ensuring regulatory compliance.
Legal Affairs Department
The Legal Affairs Department is the guarantor of the respect of laws
and regulations while being a business partner, and covers two
main areas:
■The Corporate Legal Affairs activity, which manages all stock
exchange and company laws aspects for ESI Group and its
subsidiaries, in order to ensure compliance and a good
harmonisation among the Group’s subsidiaries;
■The Contract and Intellectual Property activity, which covers
reviews, drafts, and negotiation of the various contracts with
clients and partners in the industry, government bodies and
academic institutions, and ensures that the Group’s intellectual
property rights are protected.
Quality Management Department (QMD)
The Quality Management Department has three main missions:
first, to support the Leadership Team to define and then implement
the Corporate Quality Policy. Second, to support the Process
Owners and Process Pilots to design and deploy robust processes
which will deliver the expected outcomes. And third, act as a
catalyst to spark the continuous improvement of activities.
To achieve the above-mentioned missions, the QMD will use the
following tools:
■Internal Audits;
■External Audits;
■Process Analysis;
■Process Review.
Information and Technology (IT)
In an increasingly digital and connected world, data security is of a
paramount importance for ESI, its customers, and its partners, who
are posing stricter conditions with regards to the way the Company
is handling its information.
In this context, ESI is committed to improve its capabilities on this
aspect by implementing the requirements of the international
standard ISO 27001:2013, and TISAX obligations to comply with the
particular constraints from the Automotive’s sector customers.
The IT Department ensures the application of the security policy
and the internal controls necessary to the proper application and
execution of actions to secure our assets, from a point of view
physical, logical and Human.
Internal and external audits contribute to the continuous
improvement process to help us keep our infrastructure and
procedures up to date.
Human Resources Department (HRD)
Working closely with management, ESI’s Human Resources
Department assists the Company’s strategy by factoring in the
employer-employee considerations.
ESI’s HR policy is based on four main components:
■Personal management;
■Performance management;
■Compensation management;
■An advisory function for operational staff.
Advising operational staff seeks to fostering independence among
Managers on employment issues by offering them assistance in the
field on a day-today basis, and by providing them with services
tailored to their specific needs.
The Group HRD sets the guidelines for the Group’s Human
Resources Policy which is cascaded into operational objectives for
HR business partners who assist each operational leader on their
global scope and can rely on a network of local HR to remain
competitive and compliant with local laws in 20 countries.
ESI’s Human Resources mission is to create a great work
environment, acting as a partner between the organization for the
best employee engagement and experience. ESI’s HR Policy is based
on four main components:
■Culture;
■Career Growth & Employee Engagement;
■Learning Programs;
■Compensation & Benefits.
By respecting our organization’s ethics, values, and strategy, we will
constantly ensure to foster the positive attitude of teamwork, career
growth, employee engagement, empowerment, and motivation
leading us to great achievements individually and as a whole
organization.
The Global HR Coordinators sets the guidelines for the Group’s
Human Resources Policy which is cascaded into operational
objectives for the Performance Units. They coordinate the
implementation of these objectives in collaboration with a team of
HR Business Partners working with global teams and supported by
Culture Representative member ensuring the local regulation
requirements.
/ Third-parties to the Company
The Company may call on renowned law firms for specific expertise,
dispute management, as well as a tax advisory firm. The Company
may also call on specialists from time to time to review the legal
aspects of complex mergers and acquisitions, or to verify local legal
constraints within the Group’s subsidiaries outside of France.
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CONTENTS
3.2.2. Internal control organization
The increasingly international nature of the Group’s business and
the cross-organizational character of its projects, involving
international interactions of ever-greater complexity and speed,
have highlighted the need for more rapid and efficient methods and
operational management tools, both centrally and in the
subsidiaries.
In order to achieve this objective, the organization of the
Administration and Finance Department has been structured to
ensure a high-level quality of operations and of controlling, Meeting
the level of requirements to support operational staff in the
development of the activity, and to allow a reactivity adequate to the
changes in the market in which the Group operates. The
organization of the Administration and Finance Department is
based on the following three pillars:
■A network of financial controllers having both central and local
approach, enabling to gather all required information;
■Centralized tools;
■Processes to organize reporting and control of financial
information.
A network of financial controllers
This network covers the monitoring and control of all financial
operations within the Group, according to a dual organization:
central financial controllers are dedicated to the functional
monitoring of worldwide activities (e.g. monitoring of research and
development activities, revenue generation activities, support
activities etc.), while local financial controllers are dedicated to
monitoring the scope of their subsidiaries and geographic coverage,
by providing detailed local financial information to central team.
All financial controllers report hierarchically and functionally to the
Group Administration and Financial Department and to the Group
Chief Financial Officer. Each local financial controller having access
to information as close as possible to the operations, interactions
between the teams of local and central controllers enable gathering
of information to ensure a good understanding of operations, and
analyses carried out at several levels for better anticipation and
more efficient piloting.
The size of local financial teams depends on the size of related
entities. In large countries, controlling and accounting functions are
performed by separate teams, in charge of all subsidiaries in the
country. In the case of smaller entities, local external accounting
firms ensure the bookkeeping of transactions under the supervision
of a financial controller dedicated to the geographic area.
The management IT system
Financial control is based on a management IT system consisting of
the following centralized tools, deployed on a worldwide scope:
■Salesforce, the customer relationship management tool, is the
backbone of the organization and internal control system for
sales. Salesforce gathers data about customer contracts for
Licensing and Services activities, and also more detailed
operational information for each licensing contract. This
information is automatically integrated to the accounting tool, to
allow customer invoices generation as well as revenue
recognition;
■HR-IS (HR-Information System), the HR data management tool,
enables consolidation at Group level of data related to salaries
and headcount. This tool also allows monitoring of the different
steps of the hiring process and provide managers with any
information necessary to optimize management of their teams.
HR-IS data are one of the sources used for financial reporting
regarding employees;
■Anaplan, the financial planning and analysis tool, is the
cornerstone of the budget process and ensures complete
reporting of all activities through centralizing data for the entire
Group from Salesforce, from HR-IS, and from management
systems for research and development activity as well as for
consulting activity;
■Netsuite, the accounting tool, deployed in all countries where
accounting is performed internally, enables booking of
operations for each entity according to both local accounting
standards of the country and to Group standards. Deployment
of Netsuite in all countries where accounting is externalized has
been achieved in 2022. Netsuite is integrated with the customer
relationship management tool, with the travel expenses
management tool and with the procurement tool (in France);
■Talentia CPM, the financial consolidation tool, enables to
centralize data for all Group entities, necessary to produce
consolidated financial statements compliant with IFRS standards.
Main accounting and financial
information monitoring processes
/ Accounting and consolidation process
Consolidated financial statements are prepared on a quarterly
basis. Revenue is published on a quarterly basis, whereas full
financial statements are published twice a year.
Consolidated financial statements result from the centralizing of
accounting and financial data for all Group entities, applying a
process organized around the following key points:
■A calendar of tasks to be carried out and deadlines to meet for
all people involved, be it in accounting, consolidation or FP&A
team;
■The phased deployment of a single Group accounting tool,
ensuring a homogeneous closing process and enabling to
optimize
closing
deadlines,
and
use
of
a
specialized
consolidation software;
■The separation between preparation of consolidated financial
information and control activities;
■A review of the half-year and yearly financial statements by legal
auditors, the Audit Committee and the Board of Directors.
The deployment of Netsuite in 2020 in countries where accounting
is performed internally enabled to change from a quarterly to a
monthly accounting closing.
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/ Budget monitoring and reporting process
The Group budget is established at the end of each previous
financial year. It is built on assumptions related to business
development of each entity, based on Group strategy per industry,
per business line and per customer type. These assumptions are
discussed with all internal stakeholders, then consolidated to verify
alignment with Group targets. Budget is finally validated by the
Board of Directors.
Budgeted results are compared each month with actuals and
monthly forecasts of yearly results. This reporting is sent to Group
top management each month before leadership meetings.
FP&A team also prepares key performance indicators (KPIs)
enabling performance monitoring and necessary for Group piloting.
These KPIs mostly refer to:
■Licensing and Services revenue, be it actuals or forecasted year-
end revenue, and correlation with current backlog;
■Headcount and staff costs evolution;
■Other costs evolution and their possible optimization;
■Cash position and cash forecast until the end of the current year
and at year-end for next year.
/ Revenue recognition process
Revenue recognition process is the joint responsibility of the
Finance, the Sales and the Technical Departments.
Revenue recognition calculation for Licensing is based on the
different types of existing customers contracts. For Services it is
based on the percentage of completion rate of the projects.
Reliability of data filled in business tools (customer relationship and
projects monitoring management tools) ensures accuracy of
recognized revenue.
In countries where Netsuite is deployed, revenue is calculated in the
tool on the basis of information retrieved from Salesforce. All
recognition rules, those compliant with local accounting standards
of each country, and also those compliant with Group standards
(IFRS), are configured in the system. As customer invoicing is also
performed with Netsuite, the tool enables automation of related
period-end book entries in the balance sheet.
/ Client risk management process
Client risk management process is the joint responsibility of the
Sales and the Finance Departments.
Regular monitoring of cash collection by accounting team enables
efficient incident resolution, with the help of sales team if necessary.
/ Cash management process
Finance Department is responsible for cash flows and financing
facilities management. It is in charge of:
■Controlling cash positions for all Group entities and their
adequacy to current needs, through tracking of cash inflows and
outflows. If authorized by local regulations, subsidiaries’ cash
positions are centralized;
■Establishing monthly cash forecasts for each Group entity and at
Group level, and reviewing their consistency with results
forecasts;
■Negotiating and setting necessary financing facilities (signed by
Group parent company) to ensure sufficient cash level to meet
short and medium terms engagements and enable Group
development;
■Assessing foreign exchange risks, to take any necessary
preventive action.
/ Payroll management process
The payroll process falls under the responsibility of the Human
Resources Direction and involves:
■Processing the various items involved in calculating salaries;
■Entering payroll information in the accounting system;
■Provisioning for paid vacation to distribute the expense over the
full year;
■Ensuring compliance with labor-related reporting obligations.
3.2.3. Risk management
Process management and certification
ESI Group has been ISO 9001-certified since the 2000’s and has
oriented its Quality approach to develop a worldwide certification
for the entire Group, thereby aiming to align its business activities
under the same operational criteria for all its subsidiaries. This
approach has been supplemented by the transition to the 2015
version, which is an additional asset to strengthen process
management and facilitate the implementation of risk management,
thereby ensuring long term and effective prevention.
This global approach to Process alignment and continuous
improvement continues with a commitment by Group management
to continue integrating additional key requirements (TISAX,
ISO 27001: see section 3.1.3.1 “Information Security” for details) and
thus
strengthen
operations
in
terms
of
Performance,
Confidentiality, Integrity, and Availability of information (employees,
customers, Company).
3
RISKS AND RISK MANAGEMENT
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CONTENTS
Insurance and risk coverage –
general information
In the context of its strategy regarding risk management, the Group
subscribes to several insurance policies with internationally known
insurance companies.
Thanks to these policies, the Group manages major risks that it
might face and creates a prevention mechanism to reduce the
hazards as much as possible. The Group follows up on a daily basis
the level of risks and the scope in order to adjust at best its
insurance coverage.
The Group (ESI Group and its subsidiaries) benefits from the
following insurance policies worldwide to cover the main risks:
■Cybersecurity and professional civil liability: covering the
interruption of activity due to a failure or break down of the
system, as well as the security attacks on the network, and all
their consequences (damages to third parties, loss of revenues,
cyber extortion, loss of documents, data protection and attempt
to the Group’s reputation);
■IT risks: covering damages on our IT material;
■Liability of our Directors and Officers Liability Insurance (D&O);
■Specific coverage for business trips of employees.
Depending on local risks, ESI Group subsidiaries may also subscribe
to local insurance to cover mainly the offices and vehicles, but also
some employees insurance (civil liability, accidents).
Crisis management
/ General crisis management system
The Group has developed a business continuity plan that is
intended to ensure that necessary systems, plans and actions are in
place to protect the teams and ensure the business continuity. Each
action plan is adapted to local constraints and context in order to
consider adequately specificities for each site. A crisis cell is
activated whenever particular and identified typologies of events
appear requiring a coordinated and collaborative response.
/ Specific approach related to the management
of the Covid-19 crisis
In the current context of health crisis that can affect both
employees and customers, the crisis management system has been
activated involving the creation of two specific cells:
■One rapid response cell to be in contact on the day to day with
the employees and answer all their questions. This cell, including
members from each region, was very active at the beginning of
the crisis.
■One crisis cell to ensure continuity of activities including HR,
Facilities, IT, Quality, Communication, Finance and Governance.
The crisis cell focused on:
■Coordinating all actions and information from the government
and other sources (e.g. Legal, Insurance, HR/Social, etc.) and
assessing the situation globally and locally;
■Defining and implementing the necessary measures or
guidelines (e.g. work from home, adequate infrastructures,
guidance and instructions for travellers or in case of site visits or
others aspects);
■Transforming the way of working to open new opportunities and
support business functions with new ways to interact with
customers (e.g. digital trainings, digital forums, etc.).
The measures and initiatives of the crisis cell are supported by
regular communication initiatives (“Business Continuity Plan Talk”)
held at worldwide level.
Creative Social events also have enabled employees to maintain a
strong link. The importance of maintaining team spirit, the
conviviality and looking after the well-being of our employees, led to
the setting up of activities such as “Virtual Contest”, “Virtual Coffee
break” events as well as other local or global initiatives.
As the international health situation has evolved since the beginning
of the pandemic, these initiatives have been slowed down. The
monitoring of the situation in each country is maintained.
Concerning the financing, ESI Group was granted State-guaranteed
loans (PGE). This helped strengthening the Group’s financial
position to face the foreseeable consequences of the pandemic
situation.
RISKS AND RISK MANAGEMENT
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9
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CSR APPROACH: THE FOUR AXES OF THE GLOBAL STRATEGY
80%
74%
75%
21%
12.5%
Objective
2024
2021
2022
2020
2019
Commit to enabling a safe and productive global clean
industry by providing virtual prototypes and predictive
physics for the benefit of all.
Being an outsanding
partner
OneESI
2024
Focus
to Grow
Focus
to Grow
75% of success stories mention positive impact
on planet, human and industry performance.
21.8%
25%
21.9%
22.1%
22.2%
2022
Objective
2024
2021
2020
2019
Encourage the motivation of talent by ensuring mutual
commitment in an international environment that
promotes meaningful work, professional growth,
diversity and inclusion.
Being a committed
employer
Reach 25% of women within the Group.
(a) Burn rate (or run rate) refers to the dilution represented by the total
number of options and restricted shares granted by the company
in a given period. One-year burn rates are calculated by dividing
the number of options and restricted shares granted in a year by
the total number of common shares outstanding.
0.92%
1%
0.62%
0.50%
0.54%
2022
Objective
2024
2021
2020
2019
Ensure strong and diverse governance and act in an
ethical and responsible manner.
Being an Ethical and
Commited Company
Reach an average burn rate (a) of 1%
over 3 years (based on LTI plans).
293
tGHG (b)
257
tGHG (b)
257.5
tGHG (b)
601
tGHG (b)
2022
2021
2020
2019
-51.35%
-57.25%
-57.22%
objective 2024 : -25%
compared to 2019
reduction
since 2019
(b) GHG emissions: Sum of GHG due to electricity + GHG due
to transport + GHG due to company cars.
Operate in a cleaner way to reduce our impact on the
environment and engage our staff in creating a green
world.
Being an Environnemental
Friendly player
Reduction of our GHG emissions by 25% due
to the implementation of New ways of Working
(NWoW).
IN BRIEF
CHAPTER 4
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4.1.
ESI – CORPORATE SOCIAL RESPONSIBILITY
64
4.1.1.
Purpose
64
4.1.2.
Business model
64
4.1.3.
ESI values
64
4.2.
ESI – A COMMITTED GROUP
65
4.2.1.
Setting priorities: CSR framework
65
4.2.2.
Evaluating sustainability challenges: materiality assessment
65
4.2.3.
CSR distinctions and commitments
67
4.3.
BEING A COMMITTED EMPLOYER
69
4.3.1.
Developing talents and encouraging leadership
and collaborative management
69
4.3.2.
Promoting diversity, inclusion and multicultural exchanges
72
4.3.3.
Fostering Employee well-being and job satisfaction
74
4.4.
BEING AN OUTSTANDING PARTNER
77
4.4.1.
Develop solutions aiming to having a positive impact on the planet,
human and industry performance
77
4.4.2.
Be a trusted partner to create value for customers
78
4.4.3.
Set up initiatives to interact with civil society (give-back)
79
4.5.
BEING AN ETHICAL AND COMMITTED COMPANY
81
4.5.1.
Guaranteeing solid and diversified governance
81
4.5.2.
Act ethically and responsibly
82
4.6.
BEING AN ENVIRONMENTALLY FRIENDLY PLAYER
84
4.6.1.
Moving forward to the carbon neutrality in the context of new ways of
working
84
4.6.2.
Inspire concrete actions to employees in favour of the planet
88
4.7.
EUROPEAN TAXONOMY
89
4.7.1.
Context
89
4.7.2.
Evaluation and methodology
89
4.7.3.
Results
91
4.8.
REPORTING
92
4.8.1.
Reporting methodology
92
4.8.2.
Report of the inspecting organization
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4.1.
ESI – CORPORATE SOCIAL RESPONSIBILITY
4.1.1. Purpose
“Boost human creativity to drive industrial performance to ever
higher levels.”
This is our purpose.
This emphasis on human ingenuity to steward massive change has
always been the ESI way.
We enable our customers to reach their next leap of performance
in a sustainable manner, by equipping them with software solutions
to anticipate and manage virtually the performance of their
products and assets.
Our purpose is a bold affirmation of our historical, ethical and
practical terms, as well as an expression of our journey as a leading
innovator in Virtual Prototyping software and services. This purpose
is also our guiding star, stimulating change and progress toward
what we are seeking to achieve with our entire ecosystem, while
keeping human well-being and human creativity in the heart of our
business.
4.1.2. Business model
The development of certain industrial products (cars, place, etc.)
requires significant testing phases to ensure their safety and
integrity. Traditionally, companies have used physical prototypes to
test these products and assess their ability to meet technical
requirements. The production
of
these
prototypes is an
environmental and social challenge as they require significant
amounts of materials and energy.
We are deeply passionate about the positive impact our work has
on the world and it drives us to keep striving for more every day.
Our predictive, real-time, immersive physics-powered simulation
solutions, combined with our extensive talent and intellectual
property, help our clients save valuable time, resources, and money
by avoiding costly and limited physical testing. At ESI, we operate as
One, unlocking our true potential, which is to solve complex
simulation problems at scale, thus helping industry become cleaner,
safer and more productive.
ESI designs, develops and distributes Virtual Prototyping software
on the one hand, and, on the other hand, offers its customers
access to consulting services associated with this software. The
Group primarily targets customers operating in four sectors:
Automotive, Aerospace, Heavy Industry and Energy (for more
details, see section 1.1.3 “Principal markets” of this document).
Thus, the sustainability of the Group’s business model depends on
its ability to understand the industrial and technical challenges of its
customers, to simulate them thanks to the new possibilities offered
by technology and, to do so, to rely on the talent of its employees
and the confidence of its stakeholders.
Since its creation, ESI has been committed to supporting strong
social and environmental topics such as safety or the reduction of
the industry’s environmental footprint and improvement of
productivity. In 2022, ESI has strengthened significantly its
commitments, set clear objectives and indicators in line with the
global strategy in order to be a lever for additional growth. On the
following pages we invite you to discover our CSR approach.
4.1.3. ESI values
ESI’s values infuse this recognized organization with a culture and
an ambition that have produced innovation for the benefit of the
Group’s customers, partners and employees for nearly 50 years.
These values – Passion, Global, Change, Trust, Social Responsibility
and Energy – anchor the Group’s identity and fit logically together,
as can be seen in the Corporate Social Responsibility actions
defined as follows:
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4.2.
ESI – A COMMITTED GROUP
4.2.1. Setting priorities: CSR framework
Aware of its responsibility in each of the three pillars of sustainable
development, ESI has gradually developed a Corporate Social
Responsibility (CSR) policy that contributes to shared economic and
social development and the preservation of human balance.
ESI core strategic vision is to be a To be a leading software partner
in selected virtual test markets, by leveraging our predictive physics
IP and platform for chaining to enable clean, safe and productive
industry.
The Group thus intends to be its customers’ preferred software
partner, capable of understanding and supporting them in their
efforts to bring innovative, quality, sustainable, ethical and highly
resource-efficient products to market. The Group has carried out a
review of major risks and opportunities, including the main CSR and
sustainability challenges that could have a significant impact on its
business, financial position or results.
In 2021, ESI supported by its CSR Steering Committee has clarified
and strengthened its commitments and aligned them with its
strategy and offer, through the implementation and monitoring of
social, societal and environmental initiatives with and for the
Group’s stakeholders.
Moreover in 2021 ESI has updated its materiality matrix to better
visualize its priorities, challenges, their impact on the Company and
on its main stakeholders. For more details, please refer to chapter 3
“Risks and risk management” and the following section of this
chapter.
In 2022, ESI Group continued to work on the areas identified in its
materiality matrix. ESI’s CSR strategy, which is divided into four axes
and cascaded into thirteen (13) commitments, aims to:
■Being an outstanding partner;
■Being a committed employer;
■Being an ethical and committed company;
■Being an environmentally friendly player.
Through its activities, ESI has a very limited impact on the fight
against food waste, food insecurity, respect for animal welfare, and
the promotion of responsible, fair and sustainable food.
4.2.2. Evaluating sustainability challenges: materiality assessment
In line with ESI’s commitment to ensuring responsible and sustainable business, while giving priority to issues that have the greatest impact on
the society, economy, planet and governance, and that most influence stakeholders’ decision-making, ESI establishes a materiality matrix on a
triennial basis, the last update was made in 2021.
Materiality methodology
/ 1. Identification
The preparation of this matrix involves the identification and
preliminary assessment of various risk and opportunity factors for
ESI in terms of sustainable development.
This identification step is based on:
■Sustainable Development Goals (SDGs) defined by the United
Nations Global Compact (UNGC), to which ESI contributes
through its activities and its CSR approach. ESI is also a member
of UNGC since 2018;
■Consultation of existing internal documentation, including the
2020 materiality assessment;
■A benchmark of the materiality assessment of other companies
operating in the same sector.
The identified material challenges have been reviewed and
consolidated by the CSR Steering Committee (presented under the
previous section).
/ 2. Evaluation and prioritization
The objective of this step is to rank and assess the identified
material challenges (called “commitments” henceforth) according to
their potential impact on the business and their importance to ESI’s
stakeholders.
Thirteen (13) commitments have been defined under four axes
(presented above under the performance table.
In the same line, we integrate the feedback of our stakeholders, in
particular our customers, without forgetting our suppliers,
investors, financial and legal ecosystem through a dedicated and
targeted survey.
These commitments were then positioned in a matrix – the axes of
which are represented by the two evaluated internal and external
dimensions above, evaluated via the both surveys presented above.
/ 3. Validation
This step aims to verify that the results are well aligned with the
Company’s strategy and values. The matrix is therefore adjusted
and reviewed.
Finally, the matrix followed an internal validation process and has
been audited by an external CSR agency.
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2
3
4
5
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9
Materiality matrix
Understanding the materiality results
In the materiality matrix above, ESI’s sustainable commitments (13)
are divided into three distinct sections/areas, allowing a better
visualization and understanding of the impact of each challenge and
its importance to ESI’s stakeholders, internally and externally:
■The “Critical Impact” section contains ESI’s six (6) priority
commitments;
■The “Important impact“ component encompasses six (6) major
commitments;
■The “Moderate Impact” section includes one (1) commitment.
Exploiting the materiality results
The materiality matrix is made available and accessible to all ESI’s
internal and external stakeholders. In addition, the identified
commitments are being constantly discussed by the CSR Steering
Committee in the aim to continue developing concrete sustainable
initiatives and monitor CSR performance, as part of the Group’s
commitment to ensuring a responsible and sustainable activity.
Furthermore, this materiality analysis has made it possible to
identify the priority challenges with the greatest impact on the
Company and its environment, in particular their impact on internal
and external stakeholders. These sustainability commitments will be
analysed and presented in detail in the next sections of
this chapter.
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PEOPLE FIRST
VIRTUAL PROTOTYPE FOR GOOD
TRANSPARENCY & COMPLIANCE
ENVIRONMENTALLY FRIENDLY
Interaction with civil
society (give-back)
Diversified
& solid governance
Ethics
& compliance
Development of
planet-friendly solutions
Engagement of ESI’s
colleagues in sustainability
Leadership
& collaborative management
Long-lasting
& trusted relationships
Customer satisfaction,
quality & security
Quality of work-life
Talent development
& growth of expertise
Customer support
innovation and productivity
Diversity, inclusion
& multicultural exchanges
CRITICAL
IMPACT
IMPORTANT
IMPACT
IMPACT ON EXTERNAL STAKEHOLDERS
IMPACT ON ESI’S PERFORMANCE
MODERATE
IMPACT
Group’s carbon-
neutrality objective
CONTENTS
4.2.3. CSR distinctions and commitments
Global Compact
Since 2018, ESI Group signed the Global Compact (United Nations
Global Compact) and thus undertakes to align its CSR strategy on
the ten United Nations principles, relating to human rights,
international labor standards, the environment and the fight against
corruption. The Group also undertakes to yearly communicate its
progress
to
its
stakeholders
through
the
release
of
a
Communication on Progress (COP).
For more information, visit: www.unglobalcompact.org.
The Sustainable Development Goals of the United Nations Global Compact
to which ESI Group contributes
________
As will be detailed below, the Group’s CSR commitments are strongly linked to the following Sustainable Development Goals:
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9
Women’s empowerment principles
At the end of 2022, ESI took the initiative to join the Women’s
Empowerment Principles (WEP). This community was established in
2010 by the United Nations Global Compact and UN Women and
are based on international labour and human rights standards.
There are a set of seven principles offering guidance to business on
how to promote gender equality and women’s empowerment in the
workplace, marketplace and community of which ESI has committed
to apply three principles:
1. Principle 2: Treat all women and men equally at work - respect
and support human rights and non-discrimination;
2. Principle 4: Promote education, training, and professional
development of women;
3. Principle 7: Measure and report publicly on progress towards
gender equality.
Gaïa Index
Being rewarded for its continuous improvement approach to its
social, societal, environmental and governance practices, and on the
basis of the new and increasingly demanding criteria ESI Group has
achieved the silver level as a reward for its CSR commitment based
on 2021 figures
The Gaia Index (www.gaia-index.com) was created in 2009 and
is now the benchmark sustainability index for medium-sized
listed
French
companies.
Developed
by
EthiFinance
(www.ethifinance.com), the Gaia Index selects small and medium-
sized companies based on their non-financial performance. It is
composed of the 70 best stocks out of a panel of 230.
The ratings are based on 174 criteria (economic, governance,
human capital, environment and stakeholders) and are used by the
main management companies in their management process and
their investment decisions.
Ecovadis
Since 2021, ESI Group has been engaged with Ecovadis as a source
of improvement with the objective of achieving an ESG performance
level in line with the requirements of our clients and partners.
At the time of our first assessment (2021), we had achieved the
Bronze level.
In our 2022 assessment, despite Ecovadis updating their
requirements and assessment criteria, we were able to keep our
bronze medal and we continue to work and improve our score in
future assessments.
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4.3.
BEING A COMMITTED EMPLOYER
ESI’s mission as employer is based on:
■Attract, develop and motivate talents and encourage leadership
and collaborative management;
■Promote multicultural exchanges; Ensure Diversity, equity and
Inclusion;
■Contribute to the well-being of employees and ensuring the
quality of working life.
In the context of Gender Equity, ESI has made a challenging
commitment in the form of a measurable target to increase the
percentage of women in the ESI Group by 2024 to at least 25%.
2022
2021
2020
2019
Total % women
21.8%
21.9%
22.1%
22.2%
Objective: By 2024, reach 25% of women within the Group
The results show that Women within the Group are in minority, with
percentages very similar to the ones related to women in degrees in
Engineering, Computer science and Physics, which according to
research is around 20%. If we analyse the figures the data are very
stable from the previous years.
ESI has a clear commitment to increase this percentage by defining
career path and attract women talents. In 2022, ESI achieved 50/50
gender balance across the ESI Leadership team and worked on
commitment and action on gender equality and women’s
empowerment in the workplace, the marketplace and community.
4.3.1. Developing talents and encouraging leadership
and collaborative management
Employees
are
the
major
contributors to the success of
our
company
“Ensure
inclusive
and equitable quality education and
promote lifelong learning
opportunities for all” and “Promote sustained, inclusive and
sustainable economic growth, full and productive employment and
decent work for all”.
/ Policies
In this way, ESI focuses on:
■Onboarding Programs: Ensure the future performance of new
talents with the onboarding program “Welcome Days”;
■Creation of Job Architecture Project to allow career progression;
■Performance Management: Promote talents, measure and
develop employees‘ skills;
■Learning Programs: Deploying training enabling employees to
develop their expertise and supporting in the career growth;
■Partnerships with Universities: Participating in the training and
development of junior population and employment-enhancing;
■Internal and transparent communication: Promoting the
dissemination of information to all employees.
/ Results
List of key Indicators
________
Indicators
2022
2021
2020
2019
% of employees with Permanent contracts
96%
96%
91%
92%
Number of Hours on Training
5,538
6,912
11,531
7,713
Number of hours of training/employee
5.61
6.04
9.79
6.23
Training (k€)
288
250
250
n/a
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Recruiting and retention of talents
The Group invests in permanent contracts, being the most common
type, the aim is to offer opportunities for career path. The
percentage of employees on permanent contracts remained
unchanged at 96% with respect the previous year, showing a
growing trend in comparison with 2020 and 2019.
To ensure a proper definition of, identification and inducting skilled
and talented people, a new CoE (Centre of Expertise), Talent
Acquisition, has been created in 2022.
The Group pays particular attention to the integration of new
talents through onboarding programs. In the context of the
globalization, the standard tools and the intranet portal have been
set up to guide the arrival of newcomers and guarantee that
everyone has access to a single level of information to support
them during the first days, weeks and months at ESI Group.
Since 2018, the Group integrated a practical onboarding, called
“Welcome Days”, to integrate new joiners into the company culture
within a short time. The aim of this program is to enable all new
joiners to have a better understanding of ESI, its business and its
strategy. Organized at the regional level (EMEA, AMERICAS, ASIA), it
allows newcomers to meet the top management and to exchange
with colleagues from different countries.
The Group has also defined an internal mobility system integrated
into the performance assessment tool that allows each employee to
make his or her motivations known and thus highlighting its skills
and know-how by applying to open opportunities within the Group
in connection with the customer needs and projects.
Training and Career path
The number of hours of training per employee remained almost
stable, exception of 2020 in which the Group increased the hours of
online courses due to the pandemia.
Training is key in our Human Resources policy. The group increased
the budget for training in 2022, identifying the skills to develop the
training programs and aligning employee training with company
objectives, helping employees access better quality knowledge to
develop their careers.
The Group has a digital process for evaluating the performance and
development of each employee, which aims to organize at least
once a year with his or her direct report an evaluation of the past
year’s performance in relation to previously assigned objectives and
to define the objectives for the coming year.
These assessments are the first source for collecting the training
and development needs and encourage the construction of local
and/or global training plans that are relevant and meet the needs of
the business’ development. They also provide an opportunity to
detect the Company’s high potentials and thus implement
development actions useful for their internal mobility. In addition,
this system makes it possible to support some employees more
specifically through an individual plan to improve their skills. In
2022, 95% of employees were eligible to follow the annual review,
with a completion of 99%, a strong performance in line with
previous year in which the % of completion was 97%.
During 2022, Talent Management CoE launched a global Job
Architecture project, which refers to the infrastructure or hierarchy
of jobs within the organization. Working closely with managers, the
group identify the variety of ESI Job positions, harmonizing the job
levels and the job titles worldwide, to allow the career development
and the creation of global pay structures. This project provides a
common language for organizational levels and career paths. This is
the baseline for a robust compensation policy, reflects future talent
needs and give a complete view on internal equity.
This project will continue during 2023 with the harmonization of job
documentation, and evaluation of skills in a new digital platform that
will allow to create succession plans that benchmark skills and
competencies, identify skill gaps, and implement development plans
to bridge those gaps. This tool will help ESI easily identify and
develop a robust pipeline of high performers and leaders ready to
take on new roles.
Training plan
At the same time, training programs are being rolled out in the
Group’s various teams. The training plans are aligned with ESI
Group’s strategy and market developments. They enable employees
to develop their expertise in terms of knowledge of the solutions
portfolio and to strengthen their professional (technical, sales) and
managerial skills.
In order to facilitate exchanges between countries, a platform of
language courses has been deployed in 19 countries. This platform
suits to individual constraints and location, and helps to facilitate
the sharing of knowledge and expertise across countries. In 2022,
217 employees took language courses, including 81% in English,
11% in French, 4% in German and 4% in Spanish.
In term of technical skills, the Group has set up a partnership with
Pluralsight, an e-learning platform. 150 licenses have been given to
employees to take part of several hundred online technical training
courses. In 2022, 1,239 hours of online courses were taken
globally., Most of them concerned Python programming language
and C++ language.
In addition, in 2022, employees receive, via Metacompliance
platform, online training in the areas of management, GDPR and
information security, for a total of 226 hours, all countries
combined.
4
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CONTENTS
Actions to promote trainee apprenticeship
Numerous
partnership
agreements
with
universities
and
engineering schools enable ESI Group to participate actively in the
training of students.
Several partnerships are currently in place:
■In France: Arts et Métiers Institute of Technology (Bordeaux,
Angers, Aix, Metz, Lille and Paris), Gustave Eiffel University, Saint-
Étienne University, South Brittany University, UTT (Troyes), UTC
(Compiègne);
■In Germany: Aachen University;
■In India: People’s Education Society University, Anna University,
Visvesvaraya Technological University;
■In Malaysia and in Thailand with universities of Suranaree
University of Technology;
■In Spain: Cardenal Herrera University, Universidad Politécnica de
Madrid, EHU, UJI, UJRC, University of Zaragoza;
■In Czech Republic: University of West Bohemia;
■In Tunisia: ENIT;
■In Korea: Hongik University;
■In UK: University College London, Swansea University.
■In USA: GeorgiaTech.
In 2022, the Group has welcomed a total of 29 trainees from
different universities and business school (interns and apprentices).
Internal communication
2022 was a transformational year for ESI. The Group has globalized
its operations, which requires to develop and formulate strategics
for global communications considering dispersion of employees
who are situated in different regions of the world. In concrete the
Group is based in 19 countries. Culture, values, languages are some
of the common challenges on the internal communication agenda
in the organization.
The Group has promoted and invested in an internal social
networking platform for maximizing employee engagement and
promote inclusive culture. Giving a safe and open place to the
employees to share and collaborate, boosting a global sense of
belonging.
Also, multiple communication actions are proposed in order to
strengthen information sharing and cohesion within the Group,
communicating through multiple channels such as speaking, writing,
video, training, focus groups. The Group communicates consistently
and
frequently
with
web
conferences
worldwide,
monthly
newsletters, webinars and Internal and external social networks.
In addition, several internal communication initiatives have been
pursued or launched during last years:
■Listening Campaigns are an important tool for internal
communication. it enables employees to give their opinions on
multiple dimensions. In 2022, 3 campaigns has been driven. The
survey makes it possible to identify watch points and
opportunities and required priority actions by analysing the
results;
■“Break & Chat”, enabling employees to talk to these people,
beyond formal Meetings, to discover their personality and
career, their motivations and their role at ESI;
■Corporate events are also organized to allow different
departments to exchange and meet on strategic issues;
■Adopted since 2019, the use of “Teams”, a Microsoft platform,
enables employees to exchange and organize remote Meetings
easily and more efficiently.
Change management
2021 was the launch year and and 2022 was the 1st full calendar
year of the Group three-year plan called “OneESI 2024 – Focus to
Grow”. To accompany the change, the Group created several
initiatives:
■Quarterly talks named Global Townhall Meetings led by the CEO
and the leadership team. The objective of these talks are to
accompany, cascade and inform all employees about the
transformation and its progresses;
■During 2022 a Series of #2minTransform internal videos with the
CEO and the leadership team members, have been launched to
help in the transformation journey;
■To accompany the team more closely, PU (performance unit)
Townhall have been created and hosted at least once a quarter
or once a month. These PU Townhall are led by each Leadership
team member. During these sessions they cascade the
messages delivered by the top management while disseminating
them to their perimeter: impact of decisions in their team, their
team evolution, challenges, objectives, etc.;
■The change is a long process where all stakeholders need to
receive the adequate level and type of communication, support
and answers. As a global company, with dispersed teams, the
Group created three types of groups aiming to play a specific
role in the transformation to come:
• The Leadership Team in charge of thinking, designing,
implementing the transformation,
• The extended transformation team initially composed by
change agents with a key role to play in the transformation
either because of their new function or because of their
crucial contribution in transversal projects key for the
transformation project and now composed by the direct
report of the leadership team,
• The “Change Ambassadors” with a role to share and
brainstorm on internal initiatives, create local initiatives and
share important information and guidelines locally, which
helps strengthening our internal communication and global
sense of cohesion, which further enhances the effectiveness
of the Group’s internal communication.
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CONTENTS
1
2
3
4
5
6
7
8
9
4.3.2. Promoting diversity, inclusion and multicultural exchanges
Through its “Global” value, diversity
is one of the six values promoted
by the Group as it enhances the
organization of the Company.
As an international company, ESI Group is proud to be able to have
a multicultural and diversified workforce. ESI strives to daily develop
its know-how and expertise in recruiting the best talent from
around the world. These challenges are in line with the following
Sustainable Development Goals: “Ensure availability and sustainable
management of water and sanitation for all” and “Reduce inequality
within and among countries”.
On 2022 ESI has decided to update its performance indicators by
focusing on:
■Human Rights: Establishing human rights due diligence
processes to identify, prevent and mitigate any adverse human
rights impact;
■Women’s Empowerment: Launching a diversity, equality, and
inclusion initiatives within the organization to be focus on gender
inequities and to reinforce the importance and value of diversity
and inclusion.
/ Policies
In order to promote diversity and reduce inequalities within the
Group, ESI is committed to:
■Promote diversity and multicultural exchanges;
■Increase the proportion of female employees with permanent
contracts;
■Respect the laws in favour of the accession and retention of
employees regardless of age;
■Comply with laws and regulations prohibiting any discrimination
based on age, race, sex, ethnic origin, nationality, religion, health,
disability,
marital
status,
sexual
orientation,
political
or
philosophical
opinions,
union
membership
or
other
characteristics protected by locally applicable law;
■Not tolerate any form of sexual, physical or moral harassment,
coercion or persecution;
■Conducting a Pay Equity analysis to identify potential gaps that
may be the result of discrimination and correcting them.
/ Results
Talent are located on 19 different countries. The multiculturalism is part of the DNA of ESI.
List of Key Indicators
Distribution of staff by geographical area
________
The following data for 2022 represent the distribution of staff by geographical area and country based on total headcount of 985 people.
Geographical area
2022
2021
2020
Europe, Middle East and Africa
57.9%
56.9%
56.6%
Asia-Pacific
34.9%
34.7%
34.5%
Americas
7.2%
8.4%
8.9%
Distribution of staff in the main countries
________
Countries
2022
2021
2020
France
24.7%
25.8%
26.2%
India
19.4%
21.1%
20.5%
Germany
17.5%
16.7%
15.9%
Japan
9.1%
7.9%
7.2%
USA
6.5%
7.6%
8.1%
Others
22.8%
20.9%
22.1%
The group’s talent mixes age groups and aims to integrate junior and senior profiles.
4
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Age pyramid
________
The average age of the Group’s employees is 42.3 years (women:
41.0 years and men: 42.6 years).
ESI Group respects the laws in favour of the accession and
retention of employees, regardless of their age. Thus, 25.8% of
employees are over 50 years, i.e. 254 employees worldwide. 65% of
the population aged over 50 is located in EMEA, compared to 12%
in the Americas and 22% in Asia.
In addition, 60.5% of employees hired on permanent contracts are
under 35 years old.
Breakdown of workforce by seniority
________
The average seniority in the Group is 10.4 years (8.8 years for
women and 10.8 years for men).
Integration of disabled workers
Since the beginning of 2016, the Group has been collaborating with
Elise for the Lyon and Rungis sites in France to ensure selective
sorting. Elise is a company called “adapted” which create open-
ended contracts for the persons with disabilities.
In 2022, the company launched four workshops about the
integration of disable employees with 11 attendees in France.
ESI is committed in attracted talent with disable capabilities. With a
current % of 0,71% of disable employees recognized. We improved
our policy regarding the previous year where this % was at 0,09%.
List of Key Indicators for Women’s Empowerment
________
Indicators
2022
2021
2020
2019
Gender Equality Index
90
78
77
88
% of female employees with permanent contracts
94.9%
94.8%
86.2%
86.1%
% Women at ELT
50.0%
30.0%
37.5%
37.5%
% Women (management role)
18.0%
18.5%
16.4%
17.7%
% Women (not management role)
23.0%
22.9%
23.9%
23.7%
% Women New Hires
30.0%
27.7%
26.5%
30.0%
TOTAL % WOMEN
21.8%
21.9%
22.1%
22.2%
The referred Gender Equality Index is calculated for the “Equal pay
for equal work” following regulation in France.
The percentage of female with permanent contracts remained
unchanged with respect the previous year, but shows a growing
trend in comparison to prior years. The percentage of female with
permanent contracts are very similar to the percentage for both,
men and women, which is 96%, reflecting a harmonization in the
gender balance.
During 2022, a transformational period the percentage of Women
at ELT reached 50%, and it is over 40% at the Board of Directors.
ESI has a strong commitment to increase the percentage of women
in the rest of the areas, doing initiatives to attract female talent.
The proportion of female employees at 22%, is relatively low and
stable compared to previous years.
Top management is sensitive to the feminization of local teams as
well as considering female candidates when recruiting for the
Group, additionally ESI has made a commitment in the form of a
measurable target to increase the percentage of women in the ESI
Group by 2024 to at least 25%. ESI has updated the recruitment
process, to include always a female and a male applicant for any
new job position offered in the company. In 2022, 26 women joined
the Group, representing 30% of total newcomers, up from previous
year in which the percentage was 28%.
23% of employees are holding a management role, including 18% of
women.
The Ethics Committee (composed of two women and two men) also
ensures that none of the above-mentioned discriminations is used
within the Group (see 4.5.2).
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56 to 60 years
51 to 55 years
26 to 30 years
21 to 25 years
> 60 years
46 to 50 years
41 to 45 years
36 to 40 years
31 to 35 years
Men
Women
80
40
21
35
15
4
33
33
38
28
8
37
64
88
103
134
130
115
75
24
0
40
80
120
160
21 to 25 years
16 to 20 years
11 to 15 years
6 to 10 years
< 1 year
1 to 5 years
> 26 years
Men
Women
150
100
50
0
50
100
150
200
250
14
12
12
37
42
22
38
77
98
133
173
53
76
198
CONTENTS
1
2
3
4
5
6
7
8
9
Some countries have set regulatory obligations in order to serve the
same purpose. France is one of them. “Equal pay for equal work”
has been a principle of labour law enshrined in law for several
decades. In this sense, the Avenir act aims to eliminate the pay gap
between women and men.
In accordance with these regulations, ESI Group, in France, has
calculated its Gender Equality Index, the results of which are as
follows:
■The gender pay gap: 35/40;
■The gap in individual rates of pay increase: 20/20;
■The number of employees of the under-represented sex among
the ten highest paid employees: 5/10;
■The rate of employees having benefited from a salary in the year
following their return from maternity leave: 15/15;
■Gap in % of promotion between Women and Men: 15/15;
■Total: 90/100, 12 points of improvement vs FY22.
Women@ESI
ESI pays particularly attention to gender equality within its
workforce. The group wishes to promote the presence of women in
its activities and to make digital professions where women are
under-represented more attractive.
A group of ten employees (Men and Women) has been created to
work on gender equity and harassment topic. This group meet
every two weeks to share ideas and define action plans. Here are
few of these actions:
■A dedicated channel has been created on the Yammer group;
■3 meetings has been proposed to all employees to discuss
about gender equity with special guest coming from outside of
the company;
■The French work council have a dedicated committee and
planned meetings on the topic;
■Our salary review is managed with two KPI around gender
equity;
■India, USA and South Korea already provide some trainings on
harassment. Japan and Spain are planning to. The group plans to
develop some trainings and a harassment policy for all
employees in addition to the mention on Ethics Charter.
4.3.3. Fostering Employee well-being and job satisfaction
Ensuring decent employment
and contributing to the well-being
of employees
Every company is responsible for providing decent
working conditions for all its employees. Promoting
decent work with a decent wage and ensuring the
well-being
of
employees
are
major
global
challenges, for which ESI is focused on.
This
challenge
contributes
to
the
following
Sustainable
Development Goal: “Promote sustained, inclusive and sustainable
economic growth, full and productive employment and decent
work for all”.
/ Policies
Employee well-being is critical to develop workplace. ESI is focus on
building a well-being culture, including physical, emotional, social
and career.
As an employer ESI strives to:
■Control its workforce in connection with the growth of the
activity;
■“No-Meeting Day”: one-day per week dedicated to restoring the
importance
of
taking
time,
without
meetings,
enabling
employees to work differently;
■Working from home policy to encourage a great work life
balance;
■Improve working conditions (such as modern and well-equipped
office), which has a direct impact on the well-being, efficiency
and motivation of employees;
■Create a favourable social climate;
■Employee Listening Campaigns.
/ Results
List of Key Indicators
________
Indicators
2022
2021
2020
2019
% of workforce on permanent contract
96%
96%
91%
92%
Number of accidents at work
1
0
6
11
Absenteeism (all job categories)
1.29%
2.05%
1.56%
1.42%
Flexibility NWOW access home and coworking
100%
100%
100%
n/a
Headcount data is calculated on the basis of the number of
employees present at December 31 of each fiscal year.
At December 31, 2022, ESI Group’s workforce stood at 985
employees.
96% of the Group’s workforce is on permanent contracts.
Precarious contracts such as internships, apprenticeship contracts,
etc., are not covered by the Group’s employment contract. and
fixed-term contracts represent 3.9% of the workforce. ESI continued
to pursue its ambitions to control its workforce in line with business
evolution.
During the previous years there were a reduction in the number of
accidents, the absenteeism rate it was decreased thanks to more
flexible ways of working.
In 2022, it was reported only one work accident with a severity rate
low, with only one work day lost due to it.
4
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Employee turnover
________
Recruitments
2022
2021
2020
Europe, Middle East and Africa
50
60
67
Apprenticeship/internship
7
12
15
Short-term contracts
3
1
13
Permanent contracts
40
38
39
Americas
6
6
8
Apprenticeship/internship
1
1
4
Permanent contracts
5
5
4
Asia-Pacific
30
28
23
Apprenticeship/internship
0
8
1
Short-term contracts
10
9
4
Permanent contracts
20
11
18
TOTAL
86
94
98
Leavers
2022
2021
2020
Europe, Middle East and Africa
130
100
81
Apprenticeship/internship
7
12
18
Short-term contracts
7
7
19
Permanent contracts
116
81
44
Americas
32
20
20
Apprenticeship/internship
1
1
9
Permanent contracts
31
19
11
Asia-Pacific
87
53
17
Apprenticeship/internship
0
2
1
Short-term contracts
7
18
4
Permanent contracts
80
33
12
TOTAL
249
173
118
In 2022, ESI Group recruited 65 employees on permanent
contracts, i.e. 76% of total hirings.
The departure rate of employees on permanent contracts is 24% in
2022. (number of departures under open-ended contracts/total
headcount under open-ended contracts at the beginning of the
period) × 100] compared to 12% in 2021.
The turnover rate on permanent contracts is 13.2% in 2022
[(Number of open-ended contract departures during year
N + number of open-ended contract arrivals in year N*100/2/staff
at the beginning of the period] against 8.4% for the year 2021.
Higher Turnover rate can be explained by the reduction arising
from the 3-year plan, the closure of two offices (Vietnam & Russia),
the selling of activities such as Ace+ project and also some impact
from the post-covid reactions experienced worldwide by lots of
companies, accelerated by the deep transformation of ESI.
Working time
The duration of the working time shall be set in accordance with the
local legislation in force.
Covid 19 has brought adoption of new ways of working. ESI sets up
a working from home policy to offer flexibility in an “hybrid” mode.
The greatest advantages of hybrid work are: improved work-life
balance and more efficient use of time while keeping the
contact and the culture. The global policy proposes a general
recommendation of three days in a remote way and two days on-
site.
In 2022, part-time work accounted for 7% of the total workforce;
moreover, most part-time contracts are set up to meet the needs of
employees who request them in order to arrange for parental leave,
retirement or the resumption of their studies.
Social dialogue
The quality of the social climate is a determining factor for the
quality of working life and the Company’s productivity. The social
dialogue, over and above strict regulatory compliance, constitutes a
source of progress in this area. The value of social dialogue is based
on the many exchanges between the Group’s management and
employees and their representatives.
Staff representative institutions shall be designated in accordance
with the laws in force in the countries as for France, Brazil and
Vietnam. They are regularly involved in matters relating to the
employees’ career within ESI and its development.
French legal entity has signed several agreements with its social
partners, as part-time agreement, profit sharing agreement,
employee saving agreement.
As
part
of
the
pandemic
crisis
management
in
France,
representatives
of
Health,
Safety
and
Working
Condition
Commission met regularly with ESI’s management to consider the
best strategy of a safe working environment.
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2
3
4
5
6
7
8
9
Workplace Well-being
In the era of hybrid working, make employees feel connected is one
of the primary focus of the Group. ESI is using Microsoft Teams
bringing remote employees together as a fantastic tool for
collaboration, and has launched Yammer to help employees start
conversations, and building social workplace.
Another local initiatives to build the Community well-being are:
■Organization of drawing and photo contests;
■E-coffee breaks to meet new colleagues;
■Coffee Space in the offices and organization of lunch and picnics;
■Christmas Parties with team building activities;
■Pilates and Yoga sessions, and Mindfulness training encouraging
healthy living in some countries, such as France, India, Sweden;
■Well-being Webinars and Wellness Newsletters with Health tips;
■Attention paid to personal life/life balance despite the presence
of teams in time zones as far apart as the US or Japan (e.g.
organisation of several information meeting sessions on the
same theme to cover the constraints of the zone, or recording of
the sessions to enable them to be listened to later).
Health and safety: a leitmotiv
of the year 2022
The Group’s approach is also in line
with the implementation of social
measures and benefits for our
employees worldwide, especially, by
ensuring the health of employees
on their daily professional life.
This contributes to the following two Sustainable Development
Goals: “Ensure healthy lives and promote well-being for all at all
ages” and “Promote sustained, inclusive and sustainable economic
growth, full and productive employment and decent work for all”.
/ Policies
As the health and safety of employees in the workplace and social
benefits are necessary for the smooth running of activities, ESI has
set itself the objective of:
■Providing a quality social security coverage for all its employees
worldwide;
■Offering an attractive compensation and social benefits package.
About the coronavirus pandemic (Covid-19)
During 2022, we entered in a endemic stage of the Covid-19, we
know that the virus is not going away but we have been adapted to
the new normal.
■The adoption of new ways of working as home office, while
ensuring the safety of the workplaces;
■The use of digital tools and the organization of “hybrid”
conferences.
Health, Safety and Benefits
The Group is committed with the safety and health as a core value,
taking care of the ergonomics as safety culture in the company.
Locally the company is following regulation and ergonomics
guidelines paying attention to any fatigue as a sign of any
ergonomic problem. Additionally in some countries like in India, the
company offers Wellness Newsletters with Health tips and, in some
other countries Pilates and Yoga sessions, and Mindfulness training
encouraging healthy living, are offered.
ESI Group has set itself the objective of providing coverage for to all
of its employees worldwide, both in terms of with regard to health
and old age but also the coverage of incapacity, disability and death.
The Group sets workplace health and safety best practices to
protect the employees. For example, 13 out of 19 countries offer
their employees the opportunity to finance a local health insurance
in compliance with regulations and the well-being of employees.
Some countries, such as India, Spain, Italy, offer a free medical
check-up to employees, and Tunisia has set up a mutual insurance
company that has been offered to its employees.
Wage policy
To attract and retain the best talents on the market, ESI Group has
set up an attractive compensation package and various benefits for
its employees. This policy is intended to recognize talent by
rewarding both individual and collective performance on short and
long term.
Employee compensation is made up of direct and indirect
remuneration; the latter includes cash or in-kind supplements
deferred from the monthly remuneration (bonuses, commissions,
savings plan, fringe benefits, etc.). All the countries included in the
scope of social reporting offer indirect compensation to their
employees.
As part of its “OneESI 2024 – Focus to Grow” plan, the Group is
gradually deploying an Long Term Incentive stock plan to catch up
with best practices in software companies.
Within this framework, an employee shareholding mutual funds
(“FCPE”) was created in France in 2013 in order to collect future
flows of participation and payments, housed in the Group Savings
Plan. This “FCPE” makes it possible to acquire shares of the
Company and to benefit from a 100% matching contribution, up
to an annual ceiling of €400. Beyond that, ESI subscribes to up to
20% of the payments within a range of between €401 and
€2,000 maximum.
4
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4.4.
BEING AN OUTSTANDING PARTNER
To respond effectively to the transformations of the industries it
serves, ESI Group places its activities and the solutions it delivers
within the framework of the broad ecosystem of players who also
contribute to these responses through their products and services.
It is the combination of ESI’s capacity for innovation and the
development of relationships of trust with its partners that will
ultimately ensure customer satisfaction by meeting their quality and
safety requirements in particular.
Objective: By 2024, 75% of success stories mention positive impact on planet, human and industry performance
2022
2021
2020
2019
Rate
80% (20 out of 25)
74% (17 out of 23)
21% (5 out of 19)
13% (2 out of 14)
The trend in the results achieved shows us the significant improvement in our communication as a sustainable partner.
4.4.1. Develop solutions aiming to having a positive impact on the planet,
human and industry performance
By
increasing
pressure
from
governments, cities, and consumers
to
meet
zero-emission
goals,
industries are placing sustainability
at the top of their agenda.
ESI partners with industry leaders in leveraging advanced virtual
prototyping technologies to achieve these bold goals: We empower
engineers to design, engineer, manufacture, assemble and test a
new product concept fully virtually – reducing travel, scrap and
emissions while introducing more agile and safe operations with a
strong focus on the well-being of humans.
The benefits are palpable: Virtual development, validation and
testing secure a sustainable business with regards to both,
resilience and financial success for new low-emission business
models and responsible, eco-friendly business practices.
ESI provides a broad portfolio of offerings to address the 3Ps of
Sustainability: People, Planet and Profit supporting our customers’
journey towards Zero Fatalities, Zero Emission, Zero Waste.
In the dimension of People Sustainability ESI’s history started and
continues with a strong focus on Automotive crash and safety
certification through the Virtual Performance Solution offering. With
new challenges coming with the electrification and automation, of
vehicles in combination of emerging policies for full virtual
homologation of safety certification, ESI is in a very good position to
further lead the development of digital solutions for virtual test and
certification of safety and durability considerations.
Key focus also includes the validation of worker health and safety
considerations, including ergonomics assessments, through the
Human Centric business line and IC.IDO product offerings,
providing efficient workflows for Assembly Line and Maintenance
Process Exploration, Validation and Commissioning, enabling a VR
enabled industrial metaverse for efficient collaboration and decision
making within the global enterprises.
In terms of Planet Sustainability a number of ESI solutions together
contributes to the reduction of CO2 emission by supporting
electrification, downsizing, light weighting, scrap reduction &
recyclability challenges, This includes the Virtual Manufacturing
offerings
for
managing
lightweight
and
multimaterial
part
production,
joining
and
assembly,
system
simulation
and
optimization through SimulationX, as well as the IC.IDO solution
providing capabilities for managing increasingly complex challenges
in production, maintenance and recyclability of electrified vehicles.
The VAOne solution provides powerful solutions to manage noise
pollution (or noise generation) and comfort as another aspect of
managing both environmental as well and people considerations.
Related to the Profitability Sustainability the ESI Virtual Prototyping
offerings provide a solid base for making informed and efficient
decisions on digital information throughout the product lifecycle
while minimizing or removing the need for expensive and resource
intensive creation of physical prototypes. With the new ESI AdMoRe
and Hybrid Twin, technologies, the power of simulation capabilities
can be even further democratized both for upstream applications in
the design process, e.g. enabling design space exploration and
robustness analysis, or for downstream processes e.g. to optimize
the operational performance of product and production assets.
/ Policies
In its approach, ESI strives to:
■Meet its customers’ demand for ever more innovative products;
■The methodical identification of partners to provide more value
to customers;
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2
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5
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/ Results
List of Key Indicators
________
Indicators
2022
2021
2020
2019
% of annual renewable licences
92,3
96%
91%
84%
% of licence revenue spent on R&D efforts
33
29,8
31,4
31,4
Number of Joint events organised with customers
14
17
11
16
Number of success stories published
25
23
19
14
/ Partnerships to bring more value to more
customers
In addition to improving their intrinsic performance and qualities,
and to fully contribute to all the issues discussed above, ESI’s Virtual
Prototyping and Simulation solutions must be integrated over time
with other solutions that complement all the disciplines involved in
the development, validation and certification of the products and
services concerned. One of the expected benefits of this integration
is to make the use of simulation more natural and accessible in the
chain of activities related to the development and use of products
in operation.
This direction has accelerated considerably in 2022 with the active
development of collaborations with partners in the following three
areas:
■Technology and platform providers;
■Software players offering solutions complementary to those of
ESI; and
■Integrators and service providers ensuring the quality of
deployment required to enable customers to achieve their
objectives.
Of these three categories, it is the one relating to software players
that has seen the most significant progress during 2022 with a
particular focus on the major PLM (Product Lifecycle Management)
players.
Indeed, since they are both suppliers of the 3D geometry to which
ESI’s simulation tools are applied, and of the infrastructure that
enables the management of collaborative processes for managing
the life cycle of products and manufacturing processes, they are
ideally placed to contribute to the deployment of ESI’s Digital
Thread strategy.
4.4.2. Be a trusted partner to create value for customers
By
developing
a
partnership
ecosystem
that
respects
the
Group’s values and commitments,
ESI
contributes
to
Sustainable
Development Goal 12 and Goal 17.
Supporting customers' Objectives,
involving the entire ecosystem
Achieving customer deliverables requires multiple forms of
partnerships, of which the following are some examples that were
developed in 2022:
■The project to integrate ESI's IC.IDO virtual reality solutions with
the Windchill PLM platform developed by Parametric Technology
Corporation (PTC), which was launched in 2021, developed
considerably in 2022 with the delivery and testing of an
industrial prototype of the software connector that materializes
this collaboration. As a reminder, this integration allows both
access to PLM data from the IC.IDO environment and the launch
of review in VR directly from a PLM user's workstation, in both
cases the time savings and efficiency that the customer benefits
from are significant; One of the benefits and not the least of this
integration consists in documenting the findings made during
the immersive review directly in the PLM tool, the purpose of
which is in particular the management of change requests;
■Other partnership projects were launched in 2022 with major
PLM players aimed at accelerating the simulation process in the
automotive crash and stamping fields. In both cases, the aim is
to reduce or even eliminate digital discontinuities and offer
“seamless” integration between editing 3D geometry and
launching a simulation calculation;
■The development of ESI's relationships with certain cloud players
allows its customers to scale up their use of simulation without
committing to long and heavy investments in the required IT
infrastructures;
■Finally,
ESI's
collaboration
with
certain
services
players
accelerates the disclosure and uptake of its solutions by
customers of all sizes who, for various reasons, do not have the
time or resources to accelerate the adoption of advanced
solutions.
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Since its first ISO 9001 certification in 2000, ESI Group has extended
its quality approach, first to all its subsidiaries and from 2022
onwards, in line with the transformation, to all global transversal
processes with the aim of ensuring that ESI provides products and
services that meet customers' expectations. This initiative is
extended with the subsequent ISO 27001 (Information Security)
certification in 2022 and also through the renewals of the TISAX
(Trusted Information Security Assessment Exchange) certifications
at our sites in Germany, the Czech Republic and Spain to continue
to secure information exchanges between us and our customers.
we are Committed to continue customer satisfaction while meeting
quality and safety requirements.
Also, as a French company, ESI is complying with the European
Union data protection regulations, which are supervised in France
by the CNIL (Commission Nationale Informatique et Libertés). In 2020,
no customer related GDPR (General Data Protection Regulation)
incidents have been reported.
4.4.3. Set up initiatives to interact with civil society (give-back)
By developing part
nerships
with
the
various digital players,
ESI Group is once
again contributing to
the following Sustainable Development Goals (4, 5 and 17,
respectively): “Ensure inclusive and equitable access to quality
education and promote lifelong learning opportunities for all”,
“Achieve gender balance and empower all women and girls” as
well as “Strengthening the means of implementation and revitalize
the global partnership for sustainable development”.
ESI believes that its by working with various players in the industrial,
academic and associative digital community, that the Group will
strengthen its position as a key player in digital transformation and
as a leading player in Virtual Prototyping.
Academic Partnerships and R&D
In order to facilitate collaboration and encourage industrial
innovation, the Group makes sure to create and maintain quality
relationships with various players in the digital community, at the
industrial, academic and associative levels.
ESI’s Scientific Committee, led by Professor Francisco Chinesta and
made up of in-house experts and leading international professors,
acts in support of the Group’s research policy and strategy.
A strengthening of the Scientific Committee and its activity is
underway and will reach its cruising speed in 2023.
In the field of research, the Group participates in several academic
chairs with prestigious universities and distinguished professors.
Each chair incorporates a number of sponsored PhDs who research
state-of-the-art technologies in specific domains, for instance:
■With ENSAM (École Nationale Supérieure des Arts et Métiers in
France), on the subject of reduction of models and Hybrid Twins
combining physics-based and data-based models;
■With Zaragoza University in Spain, on the subject of artificial
intelligence and immersive environments;
■With CEU-UCH University in Valencia in Spain, on the subject of
real time process control.
ESI has also joined forces with CNRS partnered to build the
“DesCartes” project supported by CNRS@CREATE, in Singapore,
flagship project on the creation of hybrid twin models of the digitally
connected city.
At the European level, as a founding member of EIT Manufacturing
(European institute for Innovation and Technology), ESI actively
contributes to the EDUCATION programme where its experts teach
at Master level and develop with universities educational content
for both future manufacturing engineers and working professionals.
This network includes universities also in Brazil, China, Estonia,
Greece, Ireland, Japan, Mexico, Portugal, Sweden, Switzerland and
the United States.
ESI also supports its academic partners through teaching activities
provided by its experts such as:
■In Germany/Austria: HTW Berlin, RWTH Aachen, Technikerschule
München, TU Dresden, TU Wein;
■In Spain: UPV (Valence), CEU (Valence), Universidad de Zaragoza,
University of Barcelona, Madrid;
■In France: Valenciennes University, UBS (Bretagne Sud),
Bordeaux University, Université de Technologie in Troyes, Université
de Technologie in Compiègne, INSA Lyon, IPSA, the École des Mines
in Albi and campuses ENSAM (Bordeaux, Metz, Aix, Angers, Lille
and Chalons-en-Champagne);
■In the UK: Imperial College London, University of Nottingham,
University College London, Swansea University, University of
Leicester, University of Glasgow, University of Warwick, and
University of Bristol;
■In Czech Republic: Czech Technical University Prague, University
of West Bohemia, Brno University of Technology;
■In Italy: Politecnico di Bari and Politecnico di Torino;
■In India at the IIT in Bombay.
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Industrial Innovation Programs
ESI participates in several innovative projects and industrial
programs which contribute to accelerating technological and
societal progress in the following fields:
■Performance and industrial optimization;
■Decarbonization, especially transport electrification;
■Reduction of CO2 emissions and noise nuisance thanks to weight
reduction of multi-material parts;
■Support green energy projects.
Some key examples of collaboration within industrial ecosystems:
■Automotive: ESI is also one of the founding members of the
Excelcar association and has held the presidency since 1 January
2023. The objective of Excelcar is to revitalize and create jobs
around a FabLab technical platform of R&D excellence in
Bretagne (France) dedicated to the automotive industry under
the impetus of PSA (Stellantis). ESI participates in the AM2
innovation
platform
specifically
for
developing
a
digital
simulation and Virtual Prototyping channel for new multi-
material and composite architectures, with priority given to the
automotive industry; Along with Renault and Constellium, ESI is
also involved in the ISA3 project, which aims to reduce the
weight of all-aluminum doors by 15% and their cost by 20%;
■Aeronautics: ESI actively participates in CORAC (Civil Aeronautics
Research Council) initiatives, which define and accompany major
initiatives in the sector, notably the ambition for green and
sustainable aviation. Through its involvement in several projects,
ESI is helping to pave the way towards key technological leaps in
the field of high-performance materials, safety-critical systems
and operator and user comfort. In futuristic fields such as urban
aviation (UAM, e-VTOL), ESI is helping to pave the way for societal
acceptance of these new modes of transport, through its noise
prediction tools, but also facilitating the integration of innovative
solutions and architecture, in collaborative mode, thanks to its
virtual reality or system modeling solutions (MBE, MBSE);
■Space: ESI has a long history of collaboration with space
agencies (CNES, ESA, NASA, JAXA, CIRO, etc.) to develop physical
modeling and virtual prototyping solutions for special systems
(launcher, satellite, etc.), used by key players in the sector to
design and secure the integrity of payloads and critical
components onboard a launcher during the atmospheric phases
of launch.
Competitiveness Clusters
ESI Group participates in several competitiveness clusters,
principally in France, namely: Aerospace Valley (Toulouse), Astech
Paris Région (Île-de-France), Nuclear Valley (Bourgogne), NextMove
(Normandy and Île-de-France), Systematic (Île-de-France). A few
more detailed examples:
■SMART 4D: ESI Group has worked with the Nouvelle-Aquitaine
Regional Council to create the “SMART 4D” simulation
community within the Digital Aquitaine cluster. This group brings
together a number of industrial, academic and institutional
players from the region. It has led to the creation of the first
interdisciplinary digital community dedicated to HPC simulation,
Virtual Prototyping and immersive experience to support
tomorrow’s industries and applications;
■DesCartes: it is a 5-year collaborative program ESI will play
several roles in this program. First, its Scientific Director, also a
member of CNRS and ENSAM, Prof. Francisco Chinesta, will be
the program director. In addition, the Group will make its
performance simulation solutions (VPS, VA One, Simulation X,
etc.) and its expertise in hybridization and model reduction
methods available to the partners and the program. ESI will thus
be able to predict material behavior in real time, anticipate
incidents (associated with damage, cracks, corrosion, etc.), model
the wind for better use of drones, and make city management
more intelligent and human-friendly. Finally, ESI will bring all its
engineering expertise to optimize the platform in which the data
will be used to make the right decision at the right time.
■Nuclear Valley: ESI Group is also an active member of the
Nuclear
Valley
cluster,
which
helps
to
restore
the
competitiveness of the nuclear industry on the international
market by providing its expertise in virtual reality to facilitate the
replacement of existing equipment or its maintenance;
■AerospaceValley. ESI is a facilitator within the Materials,
Structures and Processes group of the Ecosystem of Excellence.
ESI participates in the development of the roadmap and is
regularly involved in the organization of thematic days around
simulation and digital transformation.
Professional associations
In order to create favourable conditions for collaboration and
industrial innovation, the Group strives to create and foster good
relations with the digital ecosystem in France and Europe.
Notably in France:
■ESI is a member of the Board of Directors of the Française de
Mécanique Association (AFM), and Prof. F. Chinesta (ESI Chief
Scientist) is the Chair. The AMF a body for information exchange,
dialogue and discussion for the mechanical engineering
community with the mission of representing French mechanical
engineering to its foreign counterparts;
■ESI is a member of the France Committee of NAFEMS which is a
global organization whose mission is to provide knowledge,
international collaboration and educational opportunities for the
use and validation of simulations in engineering. ESI is a member
of several Working Groups (Composites, Manufacturing, Additive)
and Chairman of the Composites Manufacturing working group.
And also in Europe: The Group contributes to several European
organisations and initiatives, namely:
■EIT Manufacturing, European Factories of the Future Research
Association (now MADE IN EUROPE);
■European Technology Platform for Road Transport and ETP4HPC
Association
(European
Technology
Platform
For
High
Performance Computing);
■Big Data Value Association;
■EARPA;
■European Material Modeling Council;
■European Welding Federation (European Sector Skills Strategy).
ESI also contributes to the Composites Materials Handbook
(CMH-17), an American organization supported by the FAA and the
world aeronautics industry, which has the vision of being the world’s
focal point for technical information on composite materials and
structures. ESI collaborates with the University of Bologna (I) on this
subject.
Scientific societies
ESI is a member of societies such as AMAC, SAMPE, ESAFORM, etc.
ESI is a member of the ESAFORM jury for the yearly Best industrial
research thesis award.
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4.5.
BEING AN ETHICAL AND COMMITTED COMPANY
The Group considers its main stakeholders to be its employees,
customers, suppliers, and industry and academic partners, but also
its investors and shareholders.
The main missions are:
■Guaranteeing solid and diversified governance;
■Acting ethically and responsibly.
Objective: By 2024, reach 1% average burn rate of Long-Term Incentives (LTI) plans over 3 years
2022
2021
2020
2019
Rate
0.92%
0.62%
0.50%
0.54%
ESI objective is to align with best practices with companies that ESI
competes with for talent, to attract and retain the needed talents to
achieve the three-year strategic objectives.
During these past years we reviewed our policy of long term
incentives in favour of selected employees and agreed to reach the
grant a three year average of 1% of share capital.
4.5.1. Guaranteeing solid and diversified governance
Nowadays, as the world has become more
complex and requiring companies to constantly
adapt, a strong and effective governance has
become a real necessity and ESI Group attaches
particular importance to governance topics as it
ensures the coherence and sustainability of the Company’s
strategy, guaranteeing the best framework to serve the interests
of all its stakeholders: employees, customers, investors, etc. In
February 2021, the Board of Directors appointed an independent
non-executive Chairman.
As a priority, the Group strives to maintain a diversified and efficient
governance. By separating, since February 1, 2020, the functions of
Chief Executive Officer and that of Chairman of the Board of
Directors, ESI has ensured a better balance of powers. In February
2021, the Board of Directors appointed an independent non-
executive Chairman. Now composed of seven members, six of
whom are independent and one observer, the Board is aligned with
best practices in terms of governance.
On the other hand, ESI being a group with an international
dimension, its governance takes care to integrate the different
nationalities representative of the territories in which it carries out
its activities. Thus, beyond fulfilling the conditions for gender
balance as required by law, the composition of the Board of
Directors reflects the diversity of nationalities, skills, and experience
of which the Group avails itself (see section 2.3.1 of this document).
In addition, the Chief Executive Officer relies on an international
team through global steering bodies. This organizational structure
makes it possible to benefit from the diversity and complementarity
of teams.
/ Results
List of Key Indicators
________
Indicators
2022
2021
2020
2019
% of Board of Director that are independent
85.7
85.7
62.5
62.5
Average age of Board of Directors members
60.6
60
65
64
% of women on the Board of Directors
42.86
42.86
37.5
37.5
% of Board members with foreign nationality
57.1
57.1
37.5
37.5
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4.5.2. Act ethically and responsibly
The Ethics Charter applied across
the Group is in line with the
principles
of
Sustainable
Development Goal 16: “Promote
peaceful and inclusive societies for
sustainable development, provide
access to justice for all and build effective, accountable and open
institutions at all levels”.
In 2016, the Group has issued its Ethics Charter (which is regularly
updated) to promote the observance of its values and confirm its
commitment to the main rules of conduct that the Group wishes to
see applied internally. This Ethics Charter reaffirms the legal,
regulatory and internal provisions relating to the respect of
fundamental rights at work, professional integrity, the elimination of
discrimination, and the prohibition of child and forced labour. It is
based on the respect of the ethical provisions promoted by the
conventions of the International Labour Organization. The Ethics
Charter is disseminated to all employees and is available in six
languages on the Group’s internal and external websites.
The Charter strengthens the Group’s position on corruption and
frauds, and that in application of the French law “Sapin II”.
The full document can be consulted here: https://www.esi-
group.com/company/responsibility.
A four-member Ethics Committee (two women and two men) is
responsible for creating a safe environment where employees can
adhere to the Ethics Charter and ensure that its principles are
upheld by everyone, on a daily basis. The Committee listens to and
assists employees so that they can discuss any issue involving the
implementation of and/or respect of the Ethics Charter. It also
ensures that all Group’s subsidiaries apply the principles set out in
the Charter.
/ Results
List of Key indicators
________
Indicators
2022
2021
2020
2019
Number of cases opened due to suspected non compliance
0
0
0
0
% of employees who had a training regarding ethical issues (ethical
charter, anti-corruption & prevention of harassment)
83
96.9
93
NA
% of key suppliers having signed the responsible purchase charter
20%
NA
NA
NA
% of suppliers assessed
20%
NA
NA
NA
New score on Ecovadis for responsible purchase
30/100
30/100
NA
NA
Number of customer related incidents (GDPR)
0
0
0
0
Anti-corruption and influence peddling
As ESI Group grows, the group is committed not only to strictly
comply with the legislation and regulations in the countries in which
it operates but also to apply ethical principles rooted in the Group’s
values to be a trusted partner to customers and other external and
internal stakeholders. Based on this approach, in 2022, workshops
took place to review the risk mapping and update the measures in
order to ensure that the zero- tolerance policy is respected and
applied on all levels. Note that the anti -corruption risk mapping is
reviewed on a triennial basis and in the event of a major incident.
Indeed, no major risks have been identified. This is the result of
effort that was carried out by everyone to follow the prevention and
the control measures implemented, such as:
■The willingness of top management to provide an ethical
environmental towards growth;
■Specific, formal procedures;
■A Group training programme;
■Strengthened control and audit procedures;
■A disciplinary regime.
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Whistle-blowing policy
In accordance with the regulations in force (Law of 21 March 2022
aimed at improving the protection on whistleblowers and its
application decree of 3/10/2022), ESI has updated its internal
procedure to comply with it.
Any ESI employee (present, past, future), client, supplier, partner or
third party who suspects or is informed of a possible breach of this
charter or a violation of ethical charter or law by the Company, or
one of its employees, has a duty to report it. While it is natural to be
reluctant to report abuse, everyone is strongly encouraged to do so,
as silence can have highly detrimental consequences for the
Company. The use of the whistleblowing procedure described
below is neither mandatory nor exclusive.
The new whistleblowing procedure gives the whistleblower the
possibility of reporting internally:
a. By first contacting the local/regional HR correspondent if one
exists or the direct manager;
b. In the event of a conflict of interest involving the HR
correspondent or the direct manager, contact the group’s
Corporate HRD or the N+2 manager.
In these cases, in addition to being able to send an email containing
the alert and any evidence to support the facts, it is possible to
collect alerts by telephone or voice mail.
The whistleblower can contact the Ethics Committee directly at
ethics@esi-group.com.
Using the same rules, it is also possible to escalate the alert
externally by contacting:
a. One of the 45 “competent authorities” defined by the regulation;
b. The Human Rights Defender, who will direct the person to the
competent authority or authorities;
c. The judicial authority.
This procedure is secure and guarantees the strict confidentiality of
the whistle-blower, the facts that are the subject of the report and
the persons concerned. On the other hand, any abusive
denunciation may lead to disciplinary sanctions and/or legal
proceedings.
General Data Protection Regulation
(GDPR)
Regarding the European Union data protection regulations, which
are supervised in France by the CNIL (Commission Nationale
Informatique et Libertés). Within this framework, the Group has put in
place:
a. A regularly updated register of processing operations;
b. A public privacy policy available on the Group’s digital platforms
(websites, applications, etc.);
c. Internal procedures to respect the rights of individuals and to
manage incidents;
d. Standard contractual clauses to guarantee and control inter-
group transfers;
e. Policies to ensure data security “Implementation of ISO 27001
certification” completed in 2022.
Sustainable purchasing
Purchase agreements are careful organised to guarantee the
company’s
services
quality
and
compliance
our
internal
requirements.
In
2022,
we
decided
to
integrate
social,
environmental and ethical requirements into its procurements.
These requirements are formalised in Responsible purchasing
charter (available on the following link: https://www.esi-group.com/
sites/default/files/resource/brochures/3552/Responsible
%20Purchasing%20Charter%20FY22.pdf).
The document was communicated to 20% of our suppliers was
invited to commit on the charter and to answer on questionnaire
that helped us to evaluated their commitments on several point
regarding CSR and their internal practises. As a result of this action,
20% of them has replied positively to the call and has confirmed
their CSR commitment.
Internally, procure procedures and responsible purchase charter
are known and available on the company’s internal network.
We are pursuing our responsible purchasing program to select and
continue doing business with suppliers who meets requirements in
terms of human rights and working conditions, ethical business
conduct and governance, and environmental responsibility.
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4.6.
BEING AN ENVIRONMENTALLY FRIENDLY PLAYER
Considering the nature of its activity – distribution of software and
sales of consulting services – the Group believes its impact on the
environment to be very limited. All of its activities are carried out in
offices. However, the Group has still pledged to work towards
limiting its environmental footprint.
The main environmental challenges identified by the Group are:
■Moving forward to the carbon neutrality in the context of new
ways of working;
■Inspire concrete actions to employees in favour of the planet.
Objective: By 2024, reduction of our footprint emissions by 25% due to the implementation of NWoW.
2022
2021
2020
2019
% reduction compared to 2019
51.35%
(293 T GHG)
57.22%
(257 T GHG)
57.25%
(257,5 T GHG)
n/a
(601 T GES)
Based on the results of the pre-Covid era, i.e. 2019, we can deduce that the group's efforts to reduce its greenhouse gas emissions are
beginning to bear fruits. Although the year marked a resumption of travel activity by train, vehicle and air, emissions are slightly decreasing vs
2020 and 2021.
4.6.1. Moving forward to the carbon neutrality in the context of new ways
of working
Reducing greenhouse gas emissions
As ESI operates both
in
France
and
internationally,
and
as its activity is within
the tertiary sector,
transport is the main source of its greenhouse gas emissions.
ESI’s actions meet the Sustainable Development Goal 12
(presented above) and 13 “Take urgent action to combat climate
change and its impacts”.
/ Policies
In order to reduce its carbon footprint, ESI is committed to a
process of:
■Limit emissions resulting from employees’ business travel by
train, plane and company car;
■Limit CO2 emissions resulting from goods and documents
transportation;
■Develop the use of web conferencing tools.
Considering the nature of its licensing activities and sales of
consulting services, please note that the Group’s CO2 emissions are
indirect ones, mainly part of Scope 3 of the greenhouse gas (GHG)
emissions balance sheet, particularly those related to employee
transportation.
/ Results
List of Key indicators
________
Indicators
2022
2021
2020
2019
GHG due to employee ravel by train and plane (in tons)
458.93
79.9
65.2
601.8
GHG due to employee travel in company cars (in tons)
216.705
252.725
218.33
0.147
Energy Consumption in MWH per geographical area
See table below
Reduction in carbon emission cumulated since implementation
of DocuSign TCO2
4.12
% of company cars electric of PHEV vehicles
(a)
20.4
2
(a) In France.
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Employees’ business travel
In order to limit its environmental footprint, the Group continues to
promote a proactive policy aimed at restricting travel to what is
strictly necessary. The use of the plane is reserved for journeys
above three hours and the use of the railway must be the preferred
option. In addition, the car use policy was updated to follow
environmental requirements imposed by the tightening of the
carbon tax protocol.
2022, in the wake of the easing of constraints linked to the SARS-
COV2 pandemic, has seen a clear resumption of international travel
motivated by a need to recreate links between teams spread across
the world. The Group's aim remains to limit CO2 emissions by
promoting a hybrid working model, mixing face-to-face and
teleworking and by encouraging the use of web conferencing tools.
CO2 emissions due to employee travel by train and plane (for countries for which ESI has data):
CO2 emissions due to employee travel by train and plane
(In tons)
________
(a)
Average of emissions calculated for countries with data available for the last three consecutive years.
For the countries for which data is available (USA, Sweden,
Germany, Czech Republic, France, South Korea and Japan) these
emissions amounted to 458.95 tones, an increase of 380%
compared to 2021 or 190% compared to 2020. For all countries
mentioned above, the data is supplied by the travel agencies
responsible for booking the travel requests. Any reservations taken
directly by employees are not counted because the information is
not available.
CO2 emissions due to employee travel by company car (for countries for which ESI has data):
CO2 emissions due to employee travel in company cars
(In tons/car)
________
(a)
Average of emissions calculated for countries with data available for the last three consecutive years.
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85
Germany
Sweden
3.4 2.8 5.8
92.7
296.7
15.6
27.1
114.5
50.8
Japan
4 17.3
9.8
Czech Republic
6.4
43
n/a
3
0
1.2
United States
South Korea
France
18.3
0
0
2022
2020
2021
Czech Republic
France
Germany
South
Korea
Sweden
Spain
Japan
Italy
2020
2021
2022
2019
2.204
1.716
0.409
0.4
0.395
0.4
3.0187
1.646
2.9697
0.597
0.3203
0.3203
2.407
1.635
n/a
n/a
n/a
n/a n/a
n/a
n/a n/a
2.229
1.601
2.001
0.345
2,05
1.587
1.134
3.2586
3.8396
1.3222
CONTENTS
1
2
3
4
5
6
7
8
9
In 2022, 49 employees had a company car in France, 37 in
Germany, 29 in the Czech Republic, four in Spain, four in Italy and
four in Sweden. In Japan only one person had a company car. There
were no company cars in other countries in 2022. The higher
allocation of company cars in Germany and France is due in
particular to a higher proportion of sales staff and a culture that
favours this form of compensation. For Germany, South Korea,
Japan, France, the Czech Republic, Sweden, Italy and Spain, these
emissions amounted to around 1.48 tonnes/car on average, up
41% on 2021, 23% on 2020 but down 52% on 2019. The increase
compared to 2021 or 2020 is explained by a greater use of vehicles
(more kilometres driven, therefore more carbon emitted) while the
decrease compared to 2019 shows the effort to “green” the fleet
(low emission vehicle).
To remind, ESI is engaged to have 100% of in 2024. we are. the
work had been started on the vehicle fleet in France. the
percentage has increased by more than 16% since 2019.
Managing resources
in a more sustainable way
ESI
Group
believes
that
environmental
responsibility should be a priority for all companies
and strives to reduce its environmental impact and
to manage its resources in a more sustainable way
and
contributes
to
the
same
Sustainable
Development Goal as the previous section (13):
“Take urgent action to combat climate change and
its impacts”.
/ Policies
The main environmental issues in which ESI is involved are:
■Limiting energy consumption;
■Limiting paper consumption and transitioning to the use of
recycled paper;
■Develop a waste recycling process all over the sites.
/ Outcomes
Energy consumption
Concerning our energy consumption, here is the scope of the
countries/sites covered for the information below:
■France: Consumption available for the sites of Rungis,
Compiègne, Aix en Provence (partial consumption until
8/7/2022, after changeover to a coworking site without the
possibility of having the energy consumption), Colomiers and
Voisin le Bretonneux. Energy consumption not available for Lyon,
Bordeaux, Nantes and Rennes;
■Spain: Energy consumption available for the Madrid site.
Consumption not available for the Barcelona and Vitoria sites;
■Germany: Consumption available for Neu Isenburg, Darmstadt,
Stuttgart and Dresden. Consumption not available for the
Volksburg site;
■Czech Republic: Consumption available for the sites in Pilsen.
Consumption not available for the Brno and Mlada Boleslav
sites;
■Brazil: Consumption available for the one site until November
2022. After the change to a coworking site without the possibility
of having the energy consumption;
■India: Consumption available for the two sites (Bangalore and
Pune);
■Japan: Consumption available for the Tokyo sites. Consumption
not available for the Nagoya and Osaka sites (coworking spaces);
■South Korea: Consumption available for the one site;
■Tunisia: Consumption available for the Tunis site only;
■Italy: Energy consumption not available for all sites;
■United States: Consumption available for the San Diego &
Columbia sites. Consumption not available for the Farmington
Hills, San Mateo & Huntsville sites.
Energy consumption per country in 2022
(In MHw)
________
4
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
Brazil
China
Czech
Republic
France
Germany
India
Japan
South
Korea
Spain
Thailand
Tunisia
United
Kingdom
United
States
Sweden
11
12
10
255
4
263
715
279
460
210
25
10
0.1
18
45
53
1,058
294
592
214
232
11
na
110
37
53
88
38
0.8
na
11
278
232
637
382
883
262
80
18
na
9
65
2020
2021
2022
CONTENTS
For France:
Thus, total consumption amounted to 715,33 MWh in 2022, down
32.42 % compared to 2021
For other countries:
■In Brazil, Czech Republic, Germany and India, average
consumption per employee accounted to 2,302.71 kWh, an
increase of 6.6% compared to 2021;
■In Japan, consumption per employee averagely accounted to
2 359.5 kWh stable compared to 2021 (2 331.16 kWh);
■In Tunisia, total consumption was 53.05 MWh in 2022, down 52%
compared to 2021. This means that consumption will be 28%
lower than in 2020, when the surface area of the offices was
twice as large;
■Finally, energy consumption is not measurable in Italy, and other
sites not mentioned above. For these sites, energy consumption
is included in common bills, measured annually along several
parameters other than electricity.
Finally, the Spanish office in Madrid has received a certification of
compliance with the requirements of the LEED (Leadership in
Energy and Environmental Design) standard, carried out by the
building owner.
In 2021, the Group has begun to implement a workspace
rationalization initiative (New Ways of Working) which will ultimately
allow us to find economic and ecological gains in the way we
manage our physical resources. The first effects of this initiative
happened in 2021 with, for example, the move to co-working
spaces and the relocation of the Data Center.
This rationalization exercise continue in 2022 and the appearance
of the “Coworking spaces” concept offer us an additional tool to
host our employees (in certain countries and regions) in a more
flexible, secure, economical and ecological manner. At the end of
the year, eight new coworking places were implemented.
Paper consumption
Everyday use by employees is the main source of paper
consumption.
Even if access to the premises has been reduced due to COVID-19,
Several initiatives has been implemented since 2020 that allows us
to act in a sustainable way during our “on site” operational activities:
■Japan made 100% of its prints with recycled paper, followed by
Spain on 50% of its prints and China on 35%;
■Many countries set up black and white and double-sided
printing;
■Since 2019, the Group continued to stop printing its Universal
Registration Document in paper format, reflecting ESI’s desire to
adapt to sustainable trends in communication. As indicated in
chapter 9 of this document, the Universal Registration
Document will be available in electronic version on the
Company’s website and will be available for consultation
at headquarters upon request.
IT tools
■ESI
continues
its
electronic
documents
program
by
implementing IT tools and processes to reduce the use of paper
and energy consumption related to printing. Dematerialization
has been established for many documents, including travel
orders, leave requests and offer reviews. Employees are also
strongly encouraged to use the cloud storage service under
Microsoft 365, more specifically via the Sharepoint platform;
■2022 saw the perpetuation and expansion of the use of
DocuSign allowing authenticated and electronically traced
signatures. This service has proven to be even more essential in
this year 2022. The usage rate has continued to increase (885
envelopes in 2020, 2 565 envelopes in 2021 and 3523 in 2022);
which enabled us to save 4783 ib of CO2, 6000 gal of water, 2038
of wood and 331 lb of waste. Below are the elements of
contribution to the reduction of our carbon footprint since the
adoption of this tool.
ESI Group environmental savings
Source DocuSign.
________
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9,084 lb of carbon emissions reduced
11,396 gal of water conserved
3,870 lb of wood saved
628 lb of waste eliminated
2021
2022
This compares to:
Removing 0 car from the road
Skipping 8 loads of laundry
Conserving 11 trees
Eliminating 10 cans of trash
Saving 61,582 pages of paper
CONTENTS
1
2
3
4
5
6
7
8
9
■ESI perpetuated in France the use of Digiposte to dematerialize
HR documents such as pay slips and uses Metacompliance to
digitally send each newcomer all the documents they need to
know;
■In 2022, the level of use of Teams continued to be very strong,
with an average over the year of 94,2% vs 92.4% in 2021, of
users active on the platform. The Group has implemented, since
March 2021, a more exhaustive reporting to have a clearer
vision on the use of our online communication tools.
Water consumption
The Company’s business is not very water intensive as it does not
require water for production. ESI’s water is therefore solely for
sanitary use and is drawn from urban networks.
Waste disposal and recycling
Due to its tertiary activity, ESI mainly generates office waste. To the
best of its knowledge, the Group does not generate any hazardous
waste, except Waste Electrical and Electronic Equipment (WEEE).
In France, employees are made aware of selective sorting in their
daily lives, thanks in particular to the implementation of dedicated
waste bins. On the Rungis and Lyon sites, ESI works with Elise,
a waste collection and recycling company that provides stable
employment for people with integration difficulties, particularly with
disability issues. In 2022, Elise Lyon recovered 398 kg of waste,
including 293 kg of paper and 91 kg of WEEE. Recycling this waste
saved 191 kg of CO2 emissions, 2,385 kWh of energy and 7,663
litres of water.
All the German, American, Czech, Japanese, Spanish and Italian sites
are also equipped with bins for sorting waste. It is planned to
extend this measure to all European sites in the future.
When it comes to other specific waste, notably waste of electrical
and electronic equipment (WEEE), ESI Group attaches great
importance to the environmental management of its IT equipment,
in terms of both its use and its recycling.
The Group’s IT equipment mainly comprises desktop and laptop
computers, servers, copiers and printers. The Group cannibalizes
computer hardware (uses parts of one machine to repair another)
whenever possible to give a second life to some faulty equipment.
In France and the United States, end-of-life or obsolete hardware is
collected by an authorized provider that manages the processing of
electronic waste. In Germany, the Cleaning and Facilities
Management Department, in coordination with the IT Departments,
is tasked with collecting used electronic equipment. In Japan, end-
of-life material is returned to the subcontractor. In India the
collection of our obsolete equipment is managed jointly with the
municipal waste management services. WEEE wastes are then
passed on to the local authority of each city. In Spain, an instruction
explains where obsolete electronic equipment must be taken in
order to be recycled.
Furthermore, on request to our supplier in France, printer
cartridges are collected and recycled via a completely ecological
chain.
Lastly, in the entire environmental scope, ink cartridges, batteries,
defective light bulbs and fluorescent tubes are recovered by our
various suppliers. Containers are available to staff for this purpose
in offices.
4.6.2. Inspire concrete actions to employees in favour of the planet
ESI believes that a company’s responsibility is not
limited to acting on its clients’ environmental
footprint or its own, but also to raise awareness
and engage its employees in implementing a
proactive approach and in carrying out concrete
actions.
This commitment contributes to the same objective mentioned
above (13): “Measures to combat climate change”.
/ Policies
The main environmental topics to which ESI is committed are:
■Raising the awareness of its employees on an ongoing basis of
the measures taken to avoid wasting energy;
■Suggesting concrete actions to employees to engage them in
favour of the Planet.
/ Results
In 2018, ESI produced a short video for all employees on simple
eco-responsible gestures to adopt at work (link here). This video has
been the subject of a training in 2022.
At the beginning of 2021, the Group communicated on its
commitment to plant 10,000 trees by 2025, on the aim to
contribute to the reforestation of the planet. By the end of 2021,
several hundred trees will have been planted by ESI’s customers
and employees thanks to the Reforest’Action program, a social
enterprise whose main mission is to preserve, restore and create
forests in France and around the world through collective
reforestation projects. Thus, each participant has the possibility to
follow the evolution of this reforestation project and its benefits in
real time (impact on climate, biodiversity, health and employment)
at: https://www.reforestaction.com/en/esi-group.
In 2021, we planted 2000 trees in Portugal and in 2022 we planted
2000 additional trees in Washington State in the US.
The benefits of the 4,000 trees are:
a. 600 tonnes of CO2 stored;
b. 12,000 animal shelters created;
c. 16,000 months of oxygen generated;
d. 4,000 hours of works created.
4
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CONTENTS
4.7.
EUROPEAN TAXONOMY
4.7.1. Context
Framework and requirements
of the European taxonomy
The European Regulation 2020/852 of June 18th, 2020, commonly
known as the “European Taxonomy”, establishes a reference
framework to promote sustainable investments by requiring
companies to publish the parts of their sales, capital expenditure
and operating expenses that contribute substantially to one of the
following six environmental objectives:
■Climate change mitigation ;
■Adaptation to climate change ;
■Protection and sustainable use of water and marine resources;
■Transition to a circular economy;
■Pollution prevention and control ;
■Protection and restoration of biodiversity and ecosystems.
Thus, the European Commission has defined a set of technical
criteria in order to establish a common language on the notion of
sustainability and, consequently, to direct the allocation of capital
towards activities that contribute substantially to the achievement
of one of these six objectives.
In this context, and since 2021 fiscal year, companies must
communicate, the part of their revenues, their investment
expenditures, and their operating expenses associated with so-
called “eligible” economic activities, i.e. classified in the European
Taxonomy. Since the 2022 financial year, this communication must
also include the part of revenues, capital expenditures and
operating expenses that are “aligned”, i.e. respecting the
sustainability criteria defined in the Taxonomy for the first two
climate change mitigation and adaptation objectives.
To meet these reporting obligations, a detailed analysis of all the
Group’s activities within the various consolidated entities was
carried out jointly by the Finance, CSR, R&D, Facilities, Legal and Tax
departments, as well as with the operational teams. The
identification of eligible activities and the qualification of their level
of alignment with the Taxonomy were carried out according to the
instructions and criteria of the delegated acts.
ESI Group and European taxonomy
ESI is convinced of the environmental benefits of virtual prototyping
and its role in the overall reduction of greenhouse gas emissions
through the benefits of its solutions such as:
a. Replacement of physical prototypes;
b. Optimization of product performance and durability;
c. Making products lighter to reduce the resources needed to use
them;
d. Optimizing the manufacturing process to reduce errors and
waste and the resources required.
In addition to these industrial benefits, individual Group measures
related to real estate and vehicle leasing activities are included in
the scope of the taxonomy.
At this stage, the Commission has classified the activities only for
the first two environmental objectives of the text: climate change
mitigation
and
climate
change
adaptation.
These
same
classifications and criteria for the other four environmental
objectives are being developed and expected for a first reporting
exercise in 2024.
4.7.2. Evaluation and methodology
Approach to identifying
of financial indicators
The solutions developed by ESI promote environmental
performance throughout the production chain via optimized
manufacturing and more responsibility finished products.
The Group decided to consider its activity eligible for taxonomy. The
generated revenue essentially corresponds to the definition of
activities “8.2. Data-driven solutions for GHG emission reductions.”
The Group’s activity is considered as an “enabling activity” because it
has the potential to enable manufacturers to improve their own
sustainability approach in the design-production phase of their
products. Therefore, the eligible revenues represent 100% to the
climate objectives of the European Taxonomy.
Regarding eligible CAPEX, ESI has identified two categories of capital
expenditure relevant to the Taxonomy:
■6.5 Transport by motorcycles, passenger cars and light
commercial vehicles;
■7.7 Acquisition and ownership of buildings.
For OPEX, ESI has identified three categories of operating expenses
relevant to the Taxonomy:
■7.7 Acquisition and ownership of buildings;
■8.1 Data processing, hosting and related activities;
■8.2. Data-driven solutions for GHG emission reductions.
The computational work of the indicators was carried out in
accordance with the provisions of European Commission Delegated
Regulation 2021/2178 of July 6th, 2021, and its annexes
supplementing Regulation (EU) 2020/852, based on its existing
processes and reporting systems and assumptions made by the
management.
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CONTENTS
1
2
3
4
5
6
7
8
9
The results cover all ESI’s activities included in the scope of financial
consolidation as of 31 December 2022. The financial information
used was identified through the accounting report used for the
preparation of the consolidated statements and was completed by
discussions with the Group’s management.
a. Eligible capital expenditures (CAPEX) for the year 2022 represent
34% with a numerator of €659,090, of which 100% is capital
asset acquisitions corresponding to IFRS 16.
b. Eligible operating expenses (OPEX) for the year 2022 represent
30% with a numerator of 35,598,022 euros. The part of eligible
operating expenses (OPEX) is determined by dividing the sum of
the operating expenses of eligible activities by the operating
expenses retained by the Group in accordance with the
provisions of Annex 1 of Delegated Regulation 2021/2178 of July
6th, 2021.
Methodology for assessing activities
against technical review criteria
Regarding the study on the alignment of its activities with the first
objectives
of
the
European
Taxonomy,
ESI
will
consider
collaborations with its customers and consultancies for future
exercises, as the data to be produced requires complex research
and modeling rates.
Analysis of minimum guarantees
In accordance with the minimum safeguards guiding principles
described in Article 4 of the Taxonomy Regulation, economic
activities contributing substantially to one of the climate objectives
and complying with the relevant generic and specific DNSH must
also demonstrate compliance with the minimum safeguards. These
safeguards consist of implementing procedures to align with the
OECD Guidelines and the UN Guiding Principles on Business and
Human Rights (including the principles and rights set out in the
eight core conventions cited in the International Labour
Organisation’s Declaration on Fundamental Principles and Rights at
Work and the International Bill of Human Rights). These procedures
are a prerequisite for eligible activities to be qualified as aligned.
The final report of the European Platform on Minimum Safeguards
published in October 2022 was also analyzed by the Group to take
into account details on the scope of the requirements to be met as
part of this first alignment exercise. Four themes are highlighted by
the report in conjunction with minimum safeguards: human rights
(including employee and consumers’ rights), corruption, taxation
and competition law. For each of these themes, the report
describes the criteria for non-alignment as (i) the existence and
implementation of specific procedures for each area and (ii) the
absence of recent legal convictions of the company, its managers
and subsidiaries for any of the four issues.
ESI conducted the analysis centrally via workshops conducted with
the departments concerned. In the light of these analyses, the
Group concluded that the minimum safeguards were respected,
despite some points remain to be improved.
/ Human rights
ESI is committed to respect human rights through its Ethics Charter.
The Group respects and supports the protection of international
human rights, ensuring that subsidiaries and employees are not
complicit in human rights abuses, including child labor, forced labor,
discrimination, etc. Employees are required to participate in internal
training to raise awareness of various ethical issues via the
“Metacompliance” platform.
ESI has put in place a due diligence system that follows United
Nations’ steps for alignment with minimum safeguards.
However, although ESI’s business model has a low exposure to
human rights risks, it is committed to improve the procedures in
place. While no alerts have been issued, the Group plans to be
more transparent, notably regarding the description of its system
for monitoring actions taken in response to human rights risks.
/ Corruption
ESI has put in place the necessary elements to comply with
applicable anti-corruption laws and has deployed the following
means: Code of Ethics, Risk Mapping dedicated to the fight against
corruption, responsible purchasing charter for suppliers (and its
questionnaire), and the General Conditions of Purchase.
The Group did not identify any lack of corruption-related
procedures or condemnations related to corruption that could
raise any question about the alignment of minimum safeguards.
/ Taxation
ESI has a group tax policy, dedicated tax experts, and is committed
to fighting tax evasion.
ESI strives to comply with local and international tax rules in the
internal and external transactions of its subsidiaries.
The Group has not identified any lack of procedures or
condemnations related to Taxation that could raise any question
about the alignment of minimum safeguards.
/ Competition law
Regarding competition law, ESI has put in place training modules
that include this topic.
However, the Group has planned to put in place dedicated
awareness to continue to be aligned in terms of minimum
competition law safeguards over time.
ESI strives to comply with local and international tax rules in the
internal and external transactions of its subsidiaries.
The Group has not identified any lack of procedures or
condemnations that could raise any question about the alignment
of minimum safeguards.
4
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CONTENTS
4.7.3. Results
Indicators of eligibility for the European Taxonomy (FY2022 – Objectives 1 & 2)
________
Eligibility results for fiscal year 2022
In 2022, eligible CAPEX amounts to €659,090, 34% of total CAPEX in
the denominator. Aligned CAPEX is not determined for this exercise.
As a reminder, in 2021, the amount of eligible CAPEX amounted to
€5.3 million, or 43.6% of total CAPEX.
The eligible investments for this year mainly concern leases
accounted for in accordance with IFRS 16 (see technical criteria
presented above and detailed table presented in Appendix from
page 194.
In 2022, eligible OPEX amounts to €35,598,022, 30% of total OPEX
in the denominator.
Over the 2021 financial year, the eligible amount carried forward
amounted to €2,000,000, 5.6% of OPEX in the denominator.
Regulatory tables
The regulatory tables are detailed in appendix from page194.
Change over the previous year
/ Evolution of eligibility results
The main change is related to the eligibility of 100% of the revenues
where last year we had disclosed 0% waiting for some clarifications
on criteria and market practices.
/ Methodological changes
ESI has decided to opt for a more ambitious scenario than that of
2021 by choosing to consider 100% of the turnover as eligible for
the Taxonomy (compare to 0% in 2021).
/ Perspectives
Given the evolving nature of the European regulatory framework
and the information available to date, ESI Group will revise the
methodology for calculating indicators in line with regulatory
developments, including the publication of delegated acts that will
extend the list of eligible activities to the other four environmental
objectives.
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CAPEX
ESI Group has identified two categories of
capital expenditure relevant to the
Taxonomy:
•
6.5: Transport by motorbikes, passenger
cars and light commercial vehicles
•
7.7: Acquisition and ownership of
buildings
OPEX
ESI Group has identified three categories of
operating expenses relevant to the Taxonomy:
•
7.7: Acquisition and ownership of buildings
•
8.1: Data processing, hosting and related
activities
•
8.2: Data-driven solutions to reduce GHG
emissions
REVENUES
All of ESI Group's revenues can be
included in the activity:
•
8.2: Data-driven solutions to reduce
GHG emissions
100 %
GROUP
REVENUE
ELIGIBLE
30 %
OPEX
ELIGIBLE
34 %
CAPEX
ELIGIBLE
CONTENTS
1
2
3
4
5
6
7
8
9
4.8.
REPORTING
4.8.1. Reporting methodology
Data collection and consolidation
The Company has implemented a differentiated data collection and
consolidation process according to the themes. Social reporting is
covered by an HR officer who works with local HR representatives.
The
corporate
communication
team
is
responsible
for
environmental and societal reporting through local professional
representatives. The Group plans to gradually broaden the scope
until it covers every subsidiary in a reliable manner.
The available data are sorted into three geographic areas
corresponding to the Company’s business divisions:
■Americas = Brazil and United States;
■Asia-Pacific = China, India, Japan, Malaysia, South Korea, Thailand
and Vietnam;
■Europe, Middle East and Africa = Czech Republic, England,
France, Germany, Italy, Netherlands, Spain, Sweden, and Tunisia.
Scope
The Group’s ambition is to gradually expand the scope of coverage
until it achieves full and reliable coverage of its subsidiaries. In line
with its commitments, in 2022, ESI Group continued its actions to
increase the collection and analysis of indicators internationally.
■Scope of social reporting:
Since 2012, ESI’s Human Resources Information System has
been upgraded to Sales Force for all countries, with local
management of all payroll systems in order to take into account
local specificities. Social data thus represents 100% of the
workforce;
■Scope of environmental reporting, representing 99,04% of total
workforce in 2022:
It includes France, Germany, the Czech Republic, Japan, the
United States, Tunisia, India, Switzerland, Sweden, China, Spain,
the United Kingdom, South Korea, Italy, Brazil and Vietnam.
■Scope of societal reporting:
Societal information is provided at a global level. Hence, the
reporting scope represents 100% of ESI’s headcount since 2016.
4
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CONTENTS
4.8.2. Report of the inspecting organization
This is a free translation into English of the Statutory Auditor’s report issued in French and is provided solely for the convenience of English- speaking
readers. This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.
Year ending December 31, 2022
To the Shareholders,
In our capacity as Statutory Auditor of ESI (hereinafter the “entity”), appointed as an independent third party and accredited by Cofrac (Cofrac
Inspection Accreditation no. 3-2013, whose scope is available at www.cofrac.fr), we conducted our work in order to provide a report expressing
a limited assurance conclusion on the historical information (observed and extrapolated) of the consolidated non-financial information
statement (hereinafter respectively the “Information” and the “Statement”), prepared in accordance with the Entity’s procedures (hereinafter
the “Guidelines”), for year ended on December 31, 2022, included in the management report pursuant to the legal and regulatory provisions of
articles L. 225 102-1, R. 225-105 and R. 225-105-1 of the French Commercial Code (Code de commerce).
Conclusion
Based on the procedures performed, as described in the “Nature and scope of our work” section, and the elements that we have collected,
nothing has come to our attention that causes us to believe that the consolidated non-financial information statement is not compliant with
the applicable regulatory provisions and that the Information, taken as a whole, are not presented fairly in accordance with the Guidelines.
Preparation of the non-financial performance statement
The absence of a generally accepted and commonly used framework or established practices on which to evaluate and measure the
Information permits the use of different, but acceptable, measurement techniques that may affect comparability between entities and through
time.
Consequently, the Information needs to be read and understood with reference to the Guidelines, significant elements of which are available
upon request from the entity’s headquarters.
The entity’s responsibility
The Board of Directors is responsible for:
■Selecting or establishing suitable criteria for preparing the Information;
■The preparation of the Statement in accordance with the legal and regulatory provisions, including a presentation of the business model, a
description of the principal non-financial risks, a presentation of the policies implemented considering those risks and the outcomes of
those policies, including key performance indicators and if applicable the information required by Article 8 of Regulation (EU) 2020/852
(green taxonomy);
■Designing, implementing and maintaining internal control over information relevant to the preparation of the Information that is free from
material misstatement, whether due to fraud or error. The Statement has been prepared in accordance with the entity’s Guidelines as
mentioned above.
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Responsibility of the independent third party
On the basis of our work, our responsibility is to provide a report expressing a limited assurance conclusion on:
■The compliance of the Statement with the provisions of article R. 225-105 of the French Commercial Code;
■The fairness of the information provided in accordance with article R. 225-105 I, 3 and II of the French Commercial Code, i.e., the outcomes,
including key performance indicators, and the measures implemented considering the principal risks (hereinafter the “Information”).
As we are engaged to form an independent conclusion on the Information as prepared by management, we are not permitted to be involved
in the preparation of the Information as doing so may compromise our independence.
It is not our responsibility to comment on:
■The entity’s compliance with other applicable legal and regulatory provisions (in particular the information required by Article 8 of
Regulation (EU) 2020/852 (green taxonomy), the French duty of care law and anti-corruption and tax evasion legislation);
■The fairness of the information required by Article 8 of Regulation (EU) 2020/852 (green taxonomy);
■The compliance of products and services with the applicable regulations.
Regulatory provisions and professional standards applicable
The work described below was performed in accordance with the provisions of articles A. 225-1 et seq. of the French Commercial Code and
with the professional guidance of the French Institute of Statutory Auditors (“CNCC”) applicable to such engagements, as well as with ISAE 3000
(Revised).
Independence and quality control
Our independence is defined by the provisions of article L. 822-11-3 of the French Commercial Code and the French Code of Ethics (Code de
déontologie) of statutory auditors. In addition, we have implemented a system of quality control including documented policies and procedures
to ensure the compliance with the ethical requirements, French professional guidance and applicable legal and regulatory requirements.
Means and resources
Our work was carried out by a team of 2 people between November 16 2022 and March 16 2023 and took a total of 8 days.
We were assisted in our work by our specialists in sustainable development and corporate social responsibility. We conducted 8 interviews
with people responsible for preparing the Statement, representing among general management, administration and finance, risk
management, compliance, human resources, health and safety, environment and purchasing.
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Nature and scope of our work
We planned and performed our work considering the risk of material misstatement of the Information.
We consider that the procedures we performed were based on our professional judgment and allowed us to provide a limited level of
assurance conclusion:
■We obtained an understanding of all the consolidated entities’ activities, the description of the social and environmental risks associated
with their activities;
■We assessed the suitability of the Guidelines with respect to their relevance, completeness, reliability, objectivity and understandability, with
due consideration of industry best practices, where appropriate;
■We verified that the Statement includes each category of social and environmental information set out in article L. 225-102-1 III, as well as
information regarding compliance with human rights and anti-corruption and tax evasion legislation;
■We have verified that the Statement presents the information required by II of Article R. 225-105 when relevant to the principal risks and
includes, where appropriate, an explanation of the reasons for the absence of the information required by the second paragraph of III of
Article L. 225-102-1;
■We verified that the Statement presents the business model and the principal risks associated with all the consolidated entities’ activities,
including where relevant and proportionate, the risks associated with their business relationships and products or services, as well as their
policies, measures and the outcomes, including key performance indicators related to the principal risks;
■We referred to documentary sources and conducted interviews to:
• Assessed the process used to identify and confirm the principal risks and the consistency of the outcomes and the key performance
indicators used with respect to the principal risks and the policies presented, and
• Corroborate the qualitative information (measures and outcomes) that we considered to be the most important presented in the
appendix. Our work was performed at the consolidation entity level. Our work was carried out at the level of the consolidating entity and
in a selection of entities
(1);
■We asked what internal control and risk management procedures the entity has put in place and assessed the data collection process
implemented by the entity to ensure the completeness and fairness of the Information;
■For the key performance indicators and other quantitative outcomes that we considered to be the most important presented in the
appendix1, we implemented:
• Analytical procedures to verify the proper consolidation of the data collected and the consistency of any changes in those data;
• Tests of details based on sampling or other selection methods, consisting of verifying the correct application of definitions and
procedures and reconciling the data with supporting documents. This work was carried out on a selection of contributing entities and
covered between 36% and 100% of the consolidated data selected for these tests;
■We assessed the overall consistency of the Statement based on our knowledge of all the consolidated entities.
The procedures performed in a limited assurance engagement are less extensive than those required for a reasonable assurance engagement
performed in accordance with the professional guidance of the French Institute of Statutory Auditors (“CNCC”); a higher level of assurance
would have required us to carry out more extensive procedures.
Lyon, on March 17, 2022
FINEXFI
Isabelle Lhoste
Partner
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(1)
Social indicators : group scope
Societal indicators : group scope
Environmental indicators :
GHG emissions due to employee travel by train and plane (in tons) : France and USA
GHG emissions due to employee travel by company car (in tons) : France
Energy consumption (electricity) : France
Share of electric or PHEV company vehicles : (France)
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Appendix 1
/ Qualitative indicators
■Gaïa-Index
■Ecovadis rating
■Flexibility nwow access home office and coworking
/ Social indicators
■Share of women in the Group
■Percentage of new employees on permanent contracts
■Number of hours of online courses
■Number of hours of training/employee
■Number of employees in Europe, Middle East and Africa
■Number of employees in Asia-Pacific
■Number of employees in the Americas
■Age pyramid
■Breakdown of employees by seniority
■Average length of service of employees
■Average seniority of men and women
■Gender equality index
■Share of women employed on permanent contracts
■Share of women in the ELT
■Share of women managers
■Share of women non-managers
■Share of women among newcomers
■Number of employees in ESI
■Number of total hires
■Number of total departures
/ Societal indicators
■Share of annual renewable licenses
■Number of joint events organized with clients
■Number of published success stories
■Share of the Board of Directors are independent
■Average age of directors
■Share of women on the Board of Directors
■Percentage of Board members with foreign nationality
■Percentage of key suppliers who have signed the responsible purchasing charter
■Percentage of suppliers evaluated
/ Environmental indicators
■GHG emissions due to employee travel by train and plane (in tons)
■GHG emissions due to employee travel by company car (in tons)
■Energy consumption (electricity)
■Share of electric or PHEV company vehicles
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5
MANAGEMENT
REPORT
Financial year ended December 31, 2022
5.1.
BUSINESS ACTIVITIES DURING THE 2022 FINANCIAL YEAR
98
5.1.1.
Highlights of 2022 financial year
98
5.1.2.
Consolidated financial statements
98
5.1.3.
Research and development
100
5.1.4.
ESI Group annual financial statements
100
5.2.
OUTLOOK
102
5.3.
TABLE SUMMARIZING THE RESULTS OF PAST
FINANCIAL YEARS
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In accordance with Article L. 451-1-2 of the French Monetary
and Financial Code, this chapter includes the management report
to the General Meeting of June 29, 2023 validated by the Board of
Directors on February 27, 2023. This report accounts for the
Company’s activities during the 2022 financial year, including the
result of these activities and the Company’s outlook, and presents
the Company’s accounts for the financial year.Information on
various risk factors is included in chapter 3 “Risks and risks
management.”
The Extra-Financial Performance Statement is reproduced in full in
chapter 4 of this document.
Information on the Company’s share capital, stock options and free
shares grant plans, and the transactions on the Company’s shares
are included in chapter 8 of this document.
5.1.
BUSINESS ACTIVITIES DURING THE 2022 FINANCIAL YEAR
5.1.1. Highlights of 2022 financial year
Three-year business plan: OneESI 2024 – Focus to Grow
In October 2021, ESI Group unveiled for the first time publicly a
three-year strategic plan “OneESI 2024 – Focus to Grow” including
mid-term forward-looking statement both for its revenue and its
profitability. To find more details about the plan, see part 1.1 of the
document.
2022 has been a significant step in this plan as shown in the
improvement of results detailed below. ESI Group affirmed its
strategic orientation, in particular by launching an overhaul of its
commercial offer and by refocusing its activity which resulted in the
conclusion of asset disposals. This dynamic has also made it
possible to attract new talent in all fields. Further details on this first
year of implementation are presented in section 1.1 of the present
document.
Due to the Russian conflict with Ukraine, the Group initially decided
to suspend all commercial development with its Russian and
Belarusian customers, and then closed the representative office in
Russia, attached to its Czech subsidiary Mecas. Revenue in this
territory represented 1.5% of Group revenue for the full year of
2021 (0.4% in 2022).
5.1.2. Consolidated financial statements
Consolidated financial information presented below were prepared in accordance with the IFRS standards. Non-IFRS indicators are used by
the Management to monitor Group's operational performance, as defined and presented in the strategic 3-year plan,. They are presented in
paragraph 5.1.2.2. They do not represent a substitute for IFRS indicators.
5.1.2.1.
Keys figures
The financial statements for the year ended December 31, 2021 have been retrospectively restated to reflect the implementation of the IFRS
IC decision on the recognition of configuration or customization costs for software used in SaaS (IAS 38) mode and the reclassification of
revenue relating to Co-funded Projects from revenues to research and development costs – the corresponding costs have been reclassified
from cost of sales to research and development costs.
(In € millions)
2022
2021 restated
Variation at actual
currency rate
Variation at
constant currency
rate
Total sales
133.9
132.6
1.0%
0.1%
Licenses
114.0
111.4
Services and others
19.9
21.2
Gross margin
106.2
102.9
3.3%
2.2%
% of sales
79.3%
77.6%
EBIT (Adjusted
(a))
17.8
12.7
40.7%
45.8%
% of sales
13.3%
9.6%
Operating result (EBIT)
25.4
(16.4)
n.a.
n.a.
Financial result
(1.3)
(0.9)
Income taxes
(8.8)
(1.2)
Net result
15.4
(18.5)
% of sales
11.5%
(13.9%)
Gross Cash
41.6
30.3
Net Financial Debt
(b)
(7.3)
12.5
Gearing (in %)
(c)
(8.0%)
17.2%
(a)
See paragraph 5.1.2.2.
(b)
Net Financial debt: Gross financial debt minus Cash and Cash equivalents.
(c)
Gearing: Net financial debt/Equity.
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5.1.2.2.
Financial information definitions
The financial statements for the year ended December 31, 2021
have been retrospectively restated to reflect the implementation of
the IFRS IC decision on the recognition of configuration or
customization costs for software used in SaaS mode (IAS 38) and
the reclassification of revenue relating to Co-funded Projects from
revenues to research and development costs – the corresponding
costs have been reclassified from cost of sales to research and
development costs.
In order to factor for end of Russian activity (discontinued in 2022)
as well as sale of assets in the field of fluid simulation ('CFD'), in July
2022, corresponding revenue & costs have been excluded form
“constant perimeter” indicators.
Along this document, the Group is referring to “Constant Exchange
Rate” (“cer”) indicators, in front of “Current Exchange Rate”
information since pluri-annual strategic targets have been
established at Constant Exchange Rate. Restatement of the
currency effect consists of calculating aggregates for the current
year at the exchange rate of the prior year.
Aligning with the industry best practices, the Group assesses its
revenue evolution with the key performance indicator (KPI): Annual
Recurring Revenue (ARR). The definition of this indicator is: all
revenues from license sales (including maintenance services)
excluding revenues from perpetual licenses and before changes in
deferred revenues (see Note 1.4.1 of the present document).
Adjusted EBIT and Adjusted EBIT Margin are non-IFRS indicators
used by the management to monitor performance, as presented in
the strategic 3-year plan, excluding items that, because of their
nature, cannot be considered as inherent to the recurring
performance of the Group. They do not represent a substitute for
IFRS indicators.
Adjusted EBIT means operational income (EBIT) adjusted for:
■Stock-based compensation expenses;
■Restructuring charges;
■Impairment of intangible assets;
■Amortization of intangible assets related to acquisitions;
■Application of IFRS 16 (leases);
■And other non-recurring and special items (including net gain
and losses from disposals).
Adjusted EBIT has been presented for the 1st time during the
Strategic plan presentation on October 5, 2021.
The table below is detailing the content of non-IFRS indicators at current and constant perimeters.
€m
2022
Current
perimeter
2022
Constant
perimeter
2021
Current
perimeter
2021
Constant
perimeter
Revenue
133.9
129.7
132.6
126.0
Operating Result (EBIT)
25.4
22.9
(16.4)
(20.5)
EBIT Margin (IFRS) In % of revenue
19.0%
17.7%
(12.4%)
(16.7%)
■Impact of application of IFRS 16
0.5
0.5
0.5
0.5
EBIT before IFRS 16
25.0
22.5
(16.9)
(21.0)
■Restructuring
2.7
2.5
27.6
27.6
■Other non-recurring items
(15.5)
(15.5)
(0.2)
(0.2)
■Stock-based compensation expenses
3.5
3.5
0.9
0.9
■Impairement & amortization of intangible assets related to
acquisitions
1.4
1.4
1.3
1.3
■Exceptional Profit Sharing linked with CFD sale
0.7
0.7
Adjusted EBIT
17.8
15.0
12.7
8.6
Adjusted EBIT Margin In % of revenue
13.3%
11.6%
9.6%
6.8%
5.1.2.3.
Comments on results
Changes in revenue and adjusted EBIT are presented in section 1.4
of this document.
The change in operating profit is explained by the change
in adjusted EBIT and by the recognition of gains due to asset sales
(notably CFD sale) for a global amount of €15.9 million, minored by
restructuring costs. In 2021, other operating expenses supported
the costs of departures (-€6.7 million) incurred under the “OneESI
2024” plan, as well as write-off of assets for -€20.7 million due to
this strategic plan (total amount of -€27.4 million).
Financial result is a -€1.3 million expense in 2022 (-€0.9 million the
year before). Foreign exchange rate went from +€1.0 million in 2021
to +€0.3 million in 2022 while cost of debt decreased slightly. After
taking into account income tax expense of -€8.8 million (compared
to a -€1.2 million expense in 2021), net income amounted to
€15.4 million.
5.1.2.4.
Financial situation
In 2022, ESI Group demonstrated its capacity to improve its
financial situation and presents a +€7.3 million cash positive
balance (cash and cash equivalents greater than financial debt). In
2021, net financial debt amounted €12.5 million. Gearing (Net debt/
Equity) stands at -8% (17.2% end of 2021).
Gross financial debt is down by -€8.5 million, to €34.3 million
(compared to €42.8 million at end 2021) and includes €13.6 million
of State guaranteed loans. ESI Group did not use its €10 million
short term RCF (Revolving Credit Facility) in 2022.
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The Group gross cash position end of year stood at €41.6 million
(€30.3 million end of 2021). The +€11.3 million improvement is
explained by:
■A substantial free cash flow of €11.1 million (€15.4 million in
2021). Operating profits improved while the Group paid
-€7 million of restructuring cost with One-ESI strategic plan;
■An adverse change in WCR -€3.8 million (against +€2.7 million
2021) mostly related to perimeter effects (change in “deferred
revenue” position);
■Current capital expenditures paid of -€1.9 million (compared to
-€1.4 million in 2021, restated);
■Other investment and financing cash flow include;
• +€21 million positive impact of asset sales (CFD and SCILAB),
• -€8.5 million reimbursement of the bank loans, and notably,
syndicated loan yearly instalment of -€5 million, -€2.5 million
commercial paper and -€0.9 million of other bank loans.
At December 31, 2022, ESI Group held 5.9% of its share capital in
treasury shares.
5.1.3. Research and development
5.1.3.1.
Research and development costs
Details of costs are given in note 6.1.2 of the consolidated financial
statements.
The Group’s R&D workforce is spread over three continents around
specific high-level skill centers in Europe (mainly France, Germany
and the Czech Republic), Asia (India), America (United States). This
distribution reflect the long-standing ESI culture of relying on talents
wherever they are and enabling easy interactions that are becoming
the norm after COVID pandamy and the acceleration of working
from home.
5.1.3.2.
Intellectual property
Most of the Company’s intellectual property consists of software
products that are protected by copyright, and of databases
protected by specific laws concerning database producers within
the European Union and by competition law outside the EU.
The ownership of all development work ordered and performed by
ESI Group’s subsidiaries is transferred to the Company. ESI Group
products are either owned directly by the Company or published by
the Company under publishing contracts (notably with affiliates
which first developed some products and still own them).
Most of the software products and databases published by the
Company belong to ESI Group.
The Company is the beneficiary of publishing contracts for the few
products that belong to third parties different from affiliates. These
products represent either software integrated within the Company’s
offering (for which replacement solutions could be obtained if the
third-party software is discontinued) or complementary solutions.
These latter solutions are not, however, critical to the operation of
the Company’s software.
Furthermore, the Company owns few patents directly or through its
subsidiaries.
ESI also owns a portfolio of brands, of which Hybrid Twin brand.
5.1.4. ESI Group annual financial statements
5.1.4.1.
Presentation of annual financial
statements
ESI Group is the parent company of the Group; therefore, it owns
and/or controls all of its subsidiaries. It oversees all of its
subsidiaries and centralizes most of software publishing activities.
We remind that information presented here below is prepared in
accordance with French accounting standards.
ESI Group's revenues for the year ending December 31, 2022
increases by €2.7 million to €88.5 million, compared with €85.8
million for the year ending December 31, 2021.
It is composed of revenue realized with other Group entities for
€75.9 million, mainly royalties received from ESI distribution
subsidiaries as compensation for the right to grant licenses to end
customers, of Licensing revenue realized directly with end
customers for €11.6 million and of consulting revenue for
€1.0 million.
The evolution of ESI Group's revenue follows the trend of
consolidated sales of the Group's licenses and takes into account
the reclassification of co-financed projects now excluded from
revenue (€1.9 million in 2021).
Operating result for 2022 is a profit of €14.2 million, compared with
a profit of €2.4 million in 2021. Increase of €12 million mainly results
from a decrease of operating expenses in connection with the
implementation of the strategic plan.
Financial result of ESI Group is a net gain of €16.5 million, compared
with -€3.2 million loss in 2021. It is mostly composed of
€10.4 million of reversal of investments impairments, and of forex
result of 1.3 million (probable losses on reevaluation of receivables
and payables for -€2.1 million and a €6 million reversal for 2021
accrual, booked in French accounting standards, whereas probable
gains are not booked).
Consequently, current result before tax amounts to €30.7 million.
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ESI Group also recorded exceptional gain of €12.4 million,
corresponding mainly to the gain on disposal of intangible assets
(CFD/SCILAB) and restructuring cost (-€1.3 million).
Income tax amounts to -€0.7 million and consists of corporate tax
plus the additional contribution, for -€3.3 million, and the R&D tax
credit income for the year for €2.6 million. Employee profit sharing
amounts is a -€0.7 million expense.
Net result is a +€41.7 million profit.
Taking into account this gain, the Company’s equity stands at
€73.3 million due to 2022 net result, compared to €31.3 million end
2021.
Financial debt decreases at €32.6 million (compared with
€41.3 million end 2021), mainly due to repayment of syndicated
loan yearly instalment of -€5 million and other bank loans
(-€0.9 million) as well as the promissory note used at the end of
2021 (€2.5 million). The Company's cash and cash investments
(excluding treasury shares) amounted to €20.6 million at the
balance sheet date (€8.5 million at December 31, 2021).
Breakdown of invoices issued and received at December 31, 2022
(Article D. 441-4 of the French Commercial Code)
________
Reference terms of payment used are contractual terms.
Terms greater than 91 days are mostly debts to Group subsidiaries.
Invoices issued (Customers)
(In € thousands)
Instalment payment
0 day
(indicative)
1 to 30 days
31 to 60 days
61 to 90 days
91 days and
more
Total (1 day
and more)
Number of related invoices
119
44
36
25
827
932
Total amount of the invoices
(all taxes included)
6,596
1,382
1,001
923
36,466
39,772
Percentage based on total of revenue
of the year (all taxes included)
8.20 %
1.70 %
1.20 %
1.20 %
45.40 %
49.60 %
Total amount of invoices excluded related
to doubtful receivables or not yet issued
3,601
3,601
Invoices received (Suppliers)
(In € thousands)
Instalment payment
0 day
(indicative)
1 to 30 days
31 to 60 days
61 to 90 days
91 days and
more
Total (1 day
and more)
Number of related invoices
30
20
2
6
28
56
Total amount of the invoices
(all taxes includes)
4,750
871
2,147
(112)
33,000
35,905
Percentage based on total of expenses
of the year (all taxes included)
9.00%
1.60%
4.00%
(0.20%)
62.20%
67.70%
Total amount of invoices excluded that
are related to bad debts or debts not
invoiced or recorded
One branch is integrated within ESI Group’s financial statements; details are shown in note F.3 to the financial statements.
5.1.4.2.
Allocation of net result
Situation at December 31, 2022:
■Net loss for the year: €41,737,071.95;
■Loss carried forward: -€29,734,952.48;
■Total to be allocated: €12,002,119.47.
Allocation:
■€17,317.20 in the legal reserve account;
■€11,984,802.27 to carried forward result.
Following this allocation, the legal reserve stands at €1,822,684.80.
Gain carried forward stands at €11,984,802.27.
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5.2.
OUTLOOK
2022 was an important milestone for the ESI Group in the
implementation of the "OneESI 2024 – Focus to Grow" plan and the
first benefits of this strategic repositioning are already visible in its
results. The Group intends to pursue this repositioning in 2023 and
remains confident in its ability to achieve the multi-year objectives
communicated and create long-term value for shareholders.
5.3.
TABLE SUMMARIZING THE RESULTS OF PAST
FINANCIAL YEARS
Closing date
31/12/2022
31/12/2021
31/12/2020
31/12/2019
31/01/2019
Duration of financial year (number of months)
12
12
12
11
12
Capital at balance sheet date
Share capital (in €)
18,226,848
18,192,423
18,109,776
18,055,476
18,053,676
Number of shares
■ordinary shares
6,075,616
6,064,141
6,036,592
6,018,492
6,017,892
■preference shares
Maximum number of shares to be created
■via convertible bonds
■via subscription rights
180,000
180,861
120,210
205,334
151,448
Operations and results (in €)
Revenue (excl. tax)
88,496,088
85,820,626
82,935,829
55,295,671
86,022,988
Earnings before tax, employee profit-sharing,
allowances for amortization and provisions
51,966,712
6,806,831
28,948,002
(2,973,365)
27,025,120
Income tax
(693,298)
3,026,196
3,122,046
(3,024,257)
(2,698,695)
Employee profit-sharing
(698,053)
Allowances for amortization and provisions
8,838,289
37,826,054
47,244,034
33,849,027
26,903,999
Net income
41,737,072
(27,993,027)
(15,173,986)
(27,851,406)
2,819,816
Distributed earnings
Earnings per share (in €)
Earnings after tax and employee profit-sharing,
before allowances for amortization and provisions
8.32
1.44
5.31
(0.21)
4.94
Earnings after tax, employee profit-sharing,
allowances for amortization and provisions
6.87
(4.62)
(2.51)
(4.63)
0.47
Dividend
Personnel
Average headcount (a)
217
234
259
258
264
Payroll (in €)
14,502,061
17,877,629
16,903,205
15,027,428
15,880,764
Amounts paid in benefits (social security,
social welfare, etc.) (in €)
8,256,547
8,500,368
7,689,415
6,969,914
7,466,508
(a)
Average headcount in France and in branches outside France.
5
MANAGEMENT REPORT
OUTLOOK
102
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CONTENTS
6
FINANCIAL
STATEMENTS
6.1.
CONSOLIDATED FINANCIAL STATEMENTS
104
6.1.1.
Consolidated income statement
104
6.1.2.
Consolidated balance sheet
105
6.1.3.
Consolidated statement of changes in equity
106
6.1.4.
Consolidated statement of cash flows
107
6.1.5.
Notes to the consolidated financial statements
108
6.1.6.
Statutory Auditors’ report on the consolidated financial statements
139
6.2.
ESI GROUP ANNUAL FINANCIAL STATEMENTS
143
6.2.1.
Income statement
143
6.2.2.
Balance sheet
144
6.2.3.
Notes to ESI Group annual financial statements
145
6.2.4.
Statutory Auditors’ report on the financial statements
165
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103
CONTENTS
6.1.
CONSOLIDATED FINANCIAL STATEMENTS
In 2022, the Group closed the sale of its non-strategic fluid simulation software (CFD) and discontinued its activities in Russia. As the impact of
these transactions was not considered significant ( -€6.6 million on revenues in 2021 and -€4.2 million in 2022), proforma accounts have not
been established.
6.1.1. Consolidated income statement
(In € thousands)
Note
December 31,
2022
December 31, 2021
restated
(a)
Licenses and maintenance
113,957
111,356
Consulting
18,648
20,773
Other
1,313
449
Revenue
4.1.
133,918
132,578
Cost of sales
4.8.
(27,685)
(29,700)
Research and development costs
6.1.2.
(36,112)
(31,302)
Selling and marketing expenses
(33,526)
(38,990)
General and administrative expenses
(23,942)
(21,723)
Current operating result
12,651
10,863
Other operating income and expenses
4.9.
12,791
(27,401)
Operating result
25,442
(16,538)
Financial result
7.2.
(1,312)
(883)
Share of profit of associates
99
80
Income before income tax expense and minority interests
24,229
(17,341)
Provision for income tax
8.1.
(8,835)
(1,244)
Net income before minority interests
15,395
(18,585)
Non-Controlling interests
(26)
(10)
NET INCOME (GROUP SHARE)
15,421
(18,575)
Earnings per share (in €)
9.3.
2.69
(3.26)
Diluted earnings per share (in €)
9.3.
2.63
(3.26)
(a)
The financial statements for the year ended December 31, 2021 have been retrospectively restated to reflect the implementation of the IFRIC decision on the recognition
of configuration or customization costs of software used in SaaS mode and the reclassification of revenue related to Co-funded projects from cost of sales to research
and development expenses. The comparative information has therefore been restated. See note 1.3 and note 4.1.
Consolidated statement of comprehensive income
(In € thousands)
December 31,
2022
December 31,
2021 restated
(a)
Net income before minority interests
15,395
(18,585)
Other comprehensive income recycled to income
Change in the fair value of hedging instruments
139
7
Translation differences
(433)
1,170
Other comprehensive income (loss) not recycled to income
Actuarial gains and losses
(b)
1,825
876
Income and expenses recorded directly in equity
1,532
2,053
COMPREHENSIVE INCOME
16,927
(16,532)
Attributable to Group equity holders
16,950
(16,524)
Attributable to non-controlling interests
(24)
(8)
(a) See note 1.3.
(b) The change in actuarial gains and losses in 2022 mainly reflects the increase in the discount rate for pension obligations in France for €1,3 million net of tax.
The notes are an integral part of the consolidated financial statements.
6
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
6.1.2. Consolidated balance sheet
(In € thousands)
Note
December 31,
2022
December 31, 2021
restated
(a)
Assets
Non-current assets
109,701
125,420
Goodwill
3.2
39,236
41,381
Intangible assets
6.1
33,154
40,487
Property, plant and equipment
6.2
4,100
4,094
Rights-of-use assets
4.7
12,483
16,706
Equity in net earnings of affiliated companies
961
883
Deferred tax assets
8.2
13,438
18,538
Other non-current assets
10.1.1
6,123
3,102
Cash-flow hedging instruments
7.1.4
205
229
Current assets
90,089
75,186
Trade receivables
4.2
37,142
35,548
Other current receivables
10.1.2
7,585
6,371
Prepaid expenses
10.1.3
3,763
2,948
Cash and cash equivalents
7.1.3
41,599
30,319
TOTAL ASSETS
199,789
200,606
Liabilities
Equity
90,004
72,215
Equity (Group share)
9.1
90,002
72,129
Capital
18,227
18,192
Additional paid-in capital
27,318
26,986
Reserves and retained earnings
(b)
28,831
44,949
Net income (loss)
15,421
(18,575)
Translation differences
205
577
Non-controlling interests
2
86
Non-current liabilities
38,739
55,586
Non-current share of financial debt
7.1.2
22,846
33,832
Non-current lease obligation
4.7
8,240
11,818
Provision for employee benefits
5.3
6,713
9,124
Deferred tax liabilities
8.2
—
—
Cash-flow hedging instruments
7.1.4
34
4
Other long term debt and provisions
10.2.2
905
808
Current liabilities
71,046
72,805
Current share of financial debt
7.1.2
11,439
8,954
Current lease obligation
4.7
3,896
4,552
Trade payables
6,859
5,288
Accrued compensation; taxes and others current liabilities
10.2.1
30,274
26,609
Current provisions
10.2.2
2,528
7,129
Contract liabilities
4.3
16,050
20,273
TOTAL LIABILITIES
199,789
200,606
(a) See note 1.3.
(b) Other comprehensive income (excluding translation reserves) is classified as “Reserves”.
The notes are an integral part of the consolidated financial statements.
FINANCIAL STATEMENTS
6
CONSOLIDATED FINANCIAL STATEMENTS
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105
CONTENTS
1
2
3
4
5
6
7
8
9
6.1.3. Consolidated statement of changes in equity
(In € thousands except number of shares)
Number of
shares
Capital
Additional
paid-in
capital
Net
income,
reserves
and
retained
earnings
Translation
differences
Equity
attributable
to parent
company
owners
Minority
interests
Total
Equity
At December 31, 2020 published
6,036,592
18,110
26,280
43,894
(502)
87,779
82
87,861
Change in accounting method
(a)
(307)
(307)
(307)
At December 31, 2020 restated
6,036,592
18,110
26,280
43,587
(502)
87,472
82
87,554
Change in fair value of hedging instruments
7
7
7
Translation differences
1,167
1,167
3
1,170
Actuarial gains and losses
877
877
(1)
876
Income and expenses recognized directly
in equity
884
1,167
2,051
2
2,053
Net income restated
(a)
(18,575)
(18,575)
(10)
(18,585)
Comprehensive income
(17,691)
1,167
(16,524)
(8)
(16,532)
Proceeds from issue of shares
27,549
83
705
788
788
Treasury shares
(84)
(84)
(84)
Share-based payments
681
681
681
Transactions with non-controlling interests
(150)
(51)
(201)
12
(189)
Other movements
34
(37)
(3)
(3)
At December 31, 2021 restated
6,064,141
18,192
26,986
26,377
577
72,129
86
72,215
Change in fair value of hedging Instruments
139
—
139
—
139
Translation differences
—
(435)
(435)
2
(433)
Actuarial gains and losses
1,825
—
1,825
—
1,825
Income and expenses recognized directly
in equity
1,964
(435)
1,529
2
1,532
Net income
15,421
—
15,421
(26)
15,395
Comprehensive income
17,385
(435)
16,950
(24)
16,927
Proceeds from issue of shares
11,475
34
333
—
367
—
367
Treasury shares
(2,192)
(2,192)
—
(2,192)
Share-based payments
3,031
3,031
—
3,031
Transactions with non-controlling interests
(b)
(290)
3
(287)
(60)
(347)
Other movements
(56)
60
3
—
3
AT DECEMBER 31, 2022
6,075,616
18,227
27,318
44,255
205
90,002
2
90,004
(a) See note 1.3.
(b) Transactions with non-controlling interests: this is buyout of minority shares (ESI Mecas 5%).
The notes are an integral part of the consolidated financial statements.
6
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
6.1.4. Consolidated statement of cash flows
(In € thousands)
December 31,
2022
December 31, 2021
restated
(a)
Net income before minority interests
15,395
(18,585)
Share of profit of associates
(99)
(80)
Amortization and provisions
(b)
3,799
14,085
Net impact of capitalization of research & development costs
(124)
223
Income taxes (current and deferred)
8,835
1,244
Income taxes paid
(2,943)
(2,624)
Unrealized financial gains and losses
(899)
(559)
Share-based payment transactions
3,031
681
Gains (losses) on sales and disposal of assets
(15,911)
20,983
Operating cash flow
(b)
11,084
15,368
Trade receivables
(345)
(1,010)
Trade payables
1,063
(1,477)
Other receivables and other liabilities
(c)
(4,550)
5,222
Change in working capital requirement
(3,832)
2,735
Net cash from operating activities
7,251
18,103
Purchase of intangible assets
(300)
(158)
Purchase of property, plant and equipment
(1,614)
(1,285)
Proceeds from the sale of assets
(d)
20,993
—
Other investment operations
277
(33)
Net cash used for investing activities
19,356
(1,476)
Proceeds from loans
365
716
Repayment of borrowings and lease debt
(b)
(13,896)
(11,176)
Proceeds from issue of shares
367
788
Purchase and proceeds from disposal of treasury shares
(2,192)
(84)
Purchase of non-controlling interests
—
(380)
Net cash used for financing activities
(15,356)
(10,136)
Effect of exchange rate changes on cash and cash equivalents
28
1,362
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
11,279
7,853
Opening cash position
30,319
22,466
Closing cash position
41,599
30,319
NET CHANGE IN CASH AND CASH EQUIVALENTS
11,279
7,853
(a)
See note 1.3.
(b)
IFRS 16 application results in an increase of amortization cost and reimbursement of lease debt, it thus implies an improvement of Operating cash flow by +4.9 million
in 2022 (vs. +€5.6 million in previous year), and increase of repayments in the financing part of the Cash Flow Statement for -€4.9 million (vs. -€5.7 million in 2021).
(c)
In 2022, mainly corresponds to the change in deferred revenue on activities sold or discontinued (-€4.3 million).
(d)
See note 2.
Additional information: Interested paid amounted to -€666 thousand in 2022 (compared to -€714 thousand in 2021).
The notes are an integral part of the consolidated financial statements.
FINANCIAL STATEMENTS
6
CONSOLIDATED FINANCIAL STATEMENTS
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107
CONTENTS
1
2
3
4
5
6
7
8
9
6.1.5. Notes to the consolidated financial statements
Table of contents of notes to the consolidated financial statements
NOTE 1.
Accounting principles
108
NOTE 8.
Income tax
134
NOTE 2.
Significant events of the year
110
NOTE 9.
Equity and earnings per share
136
NOTE 3.
Scope of consolidation
111
NOTE 10. Other balance sheet items
137
NOTE 4.
Operating data
114
NOTE 11. Related party transactions
138
NOTE 5.
Personnel costs and employee benefits
119
NOTE 12. Fees paid to Statutory Auditors
138
NOTE 6.
Intangible and tangible assets
125
NOTE 13. Subsequent events
138
NOTE 7.
Financing and financial instruments
129
NOTE 1.
Accounting principles
NOTE 1.1.
GENERAL INFORMATION
ESI Group is a listed French limited company (société anonyme),
registered in France and governed by French law. ESI Group has its
head office at 3 bis rue Saarinen, Rungis (94150), France. The
Company was incorporated on January 28, 1991 for a period of
99 years from the date of its registration, unless dissolved earlier or
extended. ESI Group SA is the parent company of 19 subsidiaries
operating throughout the world (see note 3 of ESI Group’ Scope of
Consolidation).
Founded in 1973, ESI Group envisions a world where Industry
commits to bold outcomes, addressing high stakes concerns –
environmental impact, safety & comfort for consumers and
workers, adaptable and sustainable business models. ESI provides
reliable and customized solutions anchored on predictive physics
modeling and Virtual Prototyping expertise to allow industries to
make the right decisions at the right time, while managing their
complexity. ESI is acting principally in automotive & land
transportation, aerospace, defense & naval and heavy industry.
The Group’s financial year runs from January 1 to December 31,
2022.
Financial statements are presented in thousands of euros. The
2022 financial statements were approved by the Board of Directors
on February 27, 2023 and will be submitted for approval to the
General Meeting of June 29, 2023.
NOTE 1.2.
ACCOUNTING STANDARDS APPLIED
The consolidated financial statements at December 31, 2022 were
prepared in accordance with the IFRS standards, as approved by
the European Union at this date. These standards are available on
the European Union website.
Moreover, consolidated financial statements have been prepared in
accordance with the historical cost method, with some exceptions
such as financial assets and liabilities booked at fair value.
NOTE 1.3.
NEW IFRS STANDARDS AND INTERPRETATIONS
/ New standards, amendments and
interpretations effective in the European
Union and mandatory for financial years
beginning on or after January 1, 2022
The new standards, interpretations and amendments whose
application is mandatory as of January 1, 2022 (in particular
amendments to IFRS 3, IAS 37 and IAS 16) have not had any impact
on the Group's consolidation financial statements, with the
exception of the application of the IFRS IC decision (IAS 38) on the
recognition of configuration or customization costs for software
used in SaaS mode (Software as a Service, see below).
The Group has not early adopted any new standards that are
mandatory after December 31, 2022, in particular the amendments
to IAS 1, 8 and 12, which the IASB has decided will apply to fiscal
years beginning on or after January 1, 2023.
Change in accounting policies
In April 2021, the IFRS IC issued a decision on the accounting
treatment of configuration or customization costs for software used
in SaaS mode (Software as a Service).
In 2022, the Group analysed the various types of costs incurred
historically in order to identify those affected by this decision. These
analyses have led the Group to change the method of accounting
for these customization and configuration costs when the Group
does not control the specific developments of the SaaS solution and
when they do not correspond to the development of an interface
with this SaaS solution. These costs are now expensed in most
cases when they are incurred, and in particular if the work is
performed internally or by a third-party integrator (unrelated to the
SaaS solution provider). The impacts of the retrospective application
of this decision at ESI Group are as follows:
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CONSOLIDATED FINANCIAL STATEMENTS
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
Balance sheet restated
(In € thousands)
Dec. 31, 2021
Published
Restatement
Dec. 31, 2021
Restated
Assets
Non-current assets
125,829
(408)
125,420
Intangible assets
41,042
(555)
40,487
Deferred tax assets
18,392
147
18,538
Current assets
75,185
75,186
TOTAL ASSETS
201,014
(408)
200,606
Liabilities
Equity
72,623
(408)
72,215
Equity (Group share)
72,537
(408)
72,129
Capital
18,192
18,192
Additional paid in capital
26,986
26,986
Reserves and retained earnings
45,256
(307)
44,949
Net income (loss)
(18,474)
(101)
(18,575)
Translation differences
577
577
Minority interests
86
86
Non-current liabilities
55,586
0
55,586
Current liabilities
72,805
0
72,805
TOTAL LIABILITIES
201,014
(408)
200,606
Cash flow statement restated
(In € thousands)
Dec. 31, 2021
Published
Restatement
Dec. 31, 2021
Restated
(a)
Net income before minority interests
(18,484)
(101)
(18,585)
Share of profit of associates
(80)
(80)
Amortization and provisions
14,222
(137)
14,085
Net impact of capitalization of development costs
223
223
Income taxes (current and deferred)
1,280
(36)
1,243
Income taxes paid
(2,624)
(2,624)
Unrealized financial gains and losses
(559)
(559)
Share-based payment transactions
682
682
Gains and losses on assets disposals and other components
20,983
20,983
Operating cash flow
15,642
(274)
15,368
Changes in working capital requirements
2,736
2,736
Net cash from operating activities
18,378
(274)
18,104
Purchase of intangible assets
(432)
274
(158)
Purchase of property, plant and equipment
(1,285)
(1,285)
Income/expenses on disposal of assets
0
0
Other investment operations
(33)
(33)
Net cash used for investing activities
(1,750)
274
(1,476)
Net cash used for financing activities
(10,136)
0
(10,136)
Effect of exchange rate changes on cash and cash equivalents
1,362
1,362
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
7,853
0
7,853
Opening cash position
22,466
22,466
Closing cash position
30,319
30,319
NET CHANGE IN CASH AND CASH EQUIVALENTS
7,853
7,853
FINANCIAL STATEMENTS
6
CONSOLIDATED FINANCIAL STATEMENTS
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109
CONTENTS
1
2
3
4
5
6
7
8
9
Income statement restated
(In € thousands)
Dec. 31, 2021
Published
Restatement
Dec. 31, 2021
Restated
(a)
Revenue
136,595
136,595
Cost of sales
(33,717)
(33,717)
Research and development costs
(31,302)
(31,302)
Selling and marketing expenses
(38,990)
(38,990)
General and administrative costs
(21,586)
(137)
(21,723)
Current operating result
11,000
(137)
10,863
Other operating income and expenses
(27,401)
(27,401)
Operating result
(16,401)
(137)
(16,538)
Financial result
(883)
(883)
Share of profit of associates
80
80
Income before income tax expense and minority interests
(17,204)
(137)
(17,341)
Provision for income tax
(1,280)
36
(1,243)
Net income before minority interests
(18,484)
(101)
(18,585)
Minority interests
(10)
(10)
NET INCOME (GROUP SHARE)
(18,474)
(101)
(18,575)
Earnings per share (in €)
(3.24)
(0.02)
(3.26)
Diluted earnings per share (in €)
(3.24)
(0.02)
(3.26)
(a) Before reclassification of Co-funded projects (note 4.1).
NOTE 1.4.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of the consolidated financial statements requires
the consideration of estimates and assumptions established by
Group management that have an impact on the valuation of assets
and liabilities, as well as on the amounts recorded as income and
expenses during the year.
The estimates relate in particular, but not exclusively, to the
assumptions used in determining the impact of stock options and
free shares allocated to certain employees, business combinations,
revenue recognition, depreciation of fixed assets (including
capitalized development costs), the estimated life of fixed assets,
the useful life of intangible assets acquired in business
combinations, the valuation of deferred tax assets, provisions for
depreciation of trades receivables, income tax expense, provisions
for risks and litigation and provisions for post-employment
commitments.
NOTE 2.
Significant events of the year
/ Continuation of the “OneESI 2024 –
Focus to Grow” strategic plan
In 2022, the Group continued to deploy the growth and profitability
plan “OneESI 2024 – Focus to Grow” launched in 2021.
The refocusing of innovation on ESI’s core sectors resulted in the
disposal, on July 13, 2022, of a non-strategic fluid simulation (“CFD”)
software suite for US$24 million, of which US$20.4 million was
received at closing. The balance is payable within 18 months from
that date, provided that the buyer does not claim any
indemnification under the contractual warranties. On July 27, 2022,
the SCILAB assets were sold for €0.8 million.
Following Russia’s invasion of Ukraine, ESI decided first to suspend
all commercial activity and then to take permanent and strict
measures to definitively stop commercial activity in Russia and
Belarus. These measures have impacted the activity of MECAS, a
wholly-owned subsidiary of ESI Group.
The consolidated revenues of the divested CFD and Russian
activities amounted to €4.2 million in 2022 (compared to
€6.6 million in 2021).
The transformation has also resulted in a reduction in the
workforce, in particular in the context of the Employment Protection
Plan launched at the end of 2021.
/ Change in scope of consolidation
During the year ended December 31, 2022:
■In January, ITI Southern Europe was dissolved and ESI Holding
(USA) was absorbed by ESI North America (USA);
■In July, the German companies ESI ITI GmbH and Engineering
System International GmbH were absorbed by ESI Software
Germany GmbH (subsequently renamed ESI Germany GmbH).
This operation was carried out retroactively to January 1, 2022;
■In September, closing the dissolutions of the two Hong Kong
companies : ESI HKE and ESI ATE;
■In
December,
ESI
Group
purchased
minority
interests
(5% shares) of ESI Mecas and now holds 100% of the shares of
this subsidiary (Czech Republic).
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NOTE 3.
Scope of consolidation
NOTE 3.1.
ACCOUNTING POLICIES RELATED TO THE SCOPE OF CONSOLIDATION
/ Business combinations
Business combinations are recognized by the acquisition method:
■The identifiable assets acquired and liabilities assumed are
measured at fair value as of the acquisition date;
■Any non-controlling interest in the acquiree (i.e. minority interest) is
measured either at fair value (“full goodwill method”) or at the non-
controlling interest’s proportion of the acquiree’s identifiable net
asset (“partial goodwill method”). This option applies on an
individual transaction basis.
Any contingent consideration related to business combinations is
recognized at its fair value on the acquisition date. After the
acquisition date, contingent consideration is measured at fair value at
the end of each subsequent reporting period. Any changes in the fair
value of contingent consideration arising more than one year after
the acquisition date are recognized in income. Changes in fair value
within one year of the acquisition date are recognized in income if
they clearly result from events after the acquisition date. Other
changes are offset against goodwill.
Where put options have been granted to minority shareholders of
subsidiaries, the amount recognized in liabilities is measured at the
present value of the option exercise price and recorded in “Other
non-current debt” or “Other current liabilities” according to its
maturity date. The balance is allocated either to Goodwill (“full
goodwill method”) or to Equity (“partial goodwill method”). Discounting
adjustments are recorded in the Financial Result. Subsequent gains
and losses (or changes) in fair value of the liability are recognized
directly in equity.
At the acquisition date, goodwill represents the difference between:
■The fair value of the consideration transferred, plus the total
minority interests in the acquiree and, for step acquisitions, the fair
value of the stake previously held at the corresponding acquisition
date, revaluated in the income statement; and
■The net fair value of the identifiable assets and liabilities acquired.
The Group has 12 months from the acquisition date to determine the
fair value of the assets and liabilities and declare the amount of
goodwill acquired. If the acquisition price is lower than the fair value
of identified assets, liabilities and contingent liabilities, the difference
is immediately recorded in the income statement.
In accordance with IFRS standards, goodwill is not amortized but is
instead subject to an impairment test. This test is performed at least
once a year and when an impairment indicator is identified. Goodwill
is allocated to cash-generating units (“CGU”) for the purposes of
impairment test.
Costs directly related to acquisitions are recorded as expenses when
incurred, and presented on a separate line of the income statement,
in “other operating income and expenses”.
For intangible assets acquired in the context of a business
combination, amortization is recorded in Current Operating Income,
split between “research and development costs” and “selling and
marketing expenses”, depending on the type of asset, Customer
relationships are amortized, the depreciation charge is recorded in
“selling and marketing expenses” in the income statement over a
period which vary according to each newly acquired activity.
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/ Impairment test of goodwill
and other intangible assets
with an indefinite useful life
ESI Group uses a single CGU for the entire Group. The Group’s
strategy is to focus on growth through innovation stemming from its
centrally managed R&D efforts and the integration of acquired
technologies (source codes, algorithms, etc.) and the support of
distribution subsidiaries managed by the Group.
As the Group has pursued its development, it has become clear that
certain technologies acquired to resolve a specific issue could be
used to resolve other issues as well. Incorporating this technology
portfolio in the Group’s software packages makes it possible to use all
of these technologies in all of the Group’s projects depending on the
solutions required. The consequence of this ever-increasing
integration is that it is more and more difficult to allocate revenue to a
specific technology and to thus create a CGU for each technology or
software program.
In addition, the revenue earned by a distribution subsidiary is
dependent not only on its own commercial performance but also,
even more so, on the software offering.
The impairment test is based on discounted value of forecast future
cash flows according to business projections, technology penetration
and the competitive situation. Future cash flows are estimated as
follows:
■The last financial year for the reference year (Y);
■Annual budget for the following year, Y+1;
■For the years Y+2 to Y+5 multi-annual business plan.
The cash flows derive from the business plan drawn up by the
Group’s Management.
The discount rate applied as of December 31, 2022 is the Group’s
weighted average cost of capital (WACC) adjusted with a risk
premium. It stands at 12.75% compared to 10.46% at December 31,
2021.
The present value of the CGU is determined by adding:
■The present value of forecasted future cash flows over the explicit
period of five years, as described above;
■The terminal value calculated by capitalizing to perpetuity the last
cash-flow of the explicit period. The long-term growth rate applied
is 5%.
This present value of the CGU either confirms the fair value of the
assets of the CGU (including developments costs capitalized), or
serves as a basis for calculating potential impairment.
The impairment test performed on the CGU at December 31, 2022
did not identify any loss in value for these assets. The test was
analysed for sensitivity to reasonably plausible changes in key
assumptions, based on a 1% increase in the discount rate or a 1%
decrease in the long-term growth rate. No impairment has been
identified. The Group’s Management believe no reasonable change in
key assumptions mentioned above that would have caused the CGU’s
recoverable to be significantly below its carrying amount.
NOTE 3.2.
CHANGE IN GOODWILL
/ For the year ended December 31, 2022
(In € thousands)
December 31,
2021
Increase
Decrease
Foreign exchange
gain/loss
December 31,
2022
Gross values
41,381
—
(2,450)
305
39,236
TOTAL NET VALUES
41,381
—
(2,450)
305
39,236
/ For the year ended December 31, 2021
(In € thousands)
December 31,
2020
Increase
Decrease
Foreign exchange
gain/loss
December 31,
2021
Gross values
41,002
379
41,381
TOTAL NET VALUES
41,002
379
41,381
No acquisition took place during financial years 2021 and 2022 and the decrease in goodwill recognized in 2022 results from asset disposal
concluded during the period.
NOTE 3.3.
AMORTIZATION OF INTANGIBLES ASSETS ACQUIRED IN BUSINESS
COMBINATIONS
The amortization of intangibles assets acquired in business
combinations is presented in the Current operating result, allocated
between research and development costs and selling and
marketing expenses depending on their type (respectively for codes
and customer relationships).
At December 31, 2022, the amortization of codes amounts to
€903 thousand (€1,129 thousand as of December 31, 2021), and
the amortization of the customer relationships stands at
€463 thousand (€398 thousand as of December 31, 2021).
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NOTE 3.4.
LIST OF ENTITIES IN THE SCOPE OF CONSOLIDATION
The table below presents the dates of creation of head offices of Group subsidiaries and the percentage of capital directly or indirectly held:
Subsidiaries
Date of creation
or acquisition
Subsidiary head office
% of capital held
December 31, 2022
December 31, 2021
Fully consolidated entities
Engineering System International
April 1973
Rungis, France
100 %
100 %
Engineering System International GmbH
July 1979
Neu-Isenburg, Allemagne
— %
100 %
ESI Japan, Ltd.
July 1991
Tokyo, Japon
100 %
100 %
ESI North America, Inc.
March 1992
Farmington, Michigan, Etats-
Unis
100 %
100 %
Hankook ESI Co., Ltd.
September 1995
Séoul, Corée du Sud
100 %
100 %
ESI Group Hispania s.l.
February 2001
Madrid, Espagne
100 %
100 %
Mecas ESI s.r.o.
May 2001
Plzen, République tchèque
100 %
95 %
ESI UK Ltd.
January 2002
Londres, Angleterre
100 %
100 %
ESI US Holding, Inc.
August 2002
Dover, Delaware, États-Unis
— %
100 %
ESI US R&D, Inc.
August 2002 San Diego, Californie, États-Unis
100 %
100 %
Calcom ESI SA
December 2002
Lausanne, Suisse
99 %
99 %
ESI Software (India) Private Ltd.
February 2004
Bangalore, Inde
100 %
100 %
Hong Kong ESI Co., Ltd.
February 2004
Hong Kong, Chine
— %
100 %
ESI-ATE Holdings Ltd.
July 2006
Hong Kong, Chine
— %
100 %
ESI South America Comércio e Serviços
de Informatica, Ltda
June 2008
São Paulo, Brésil
100 %
100 %
ESI Italia s.r.l.
September 2008
Bologne, Italie
100 %
100 %
ESI Services Tunisie SARL
April 2009
Tunis, Tunisie
100 %
100 %
ESI Group Beijing Co., Ltd.
October 2010
Pékin, Chine
100 %
100 %
ESI Germany GmbH
August 2011
Stuttgart, Allemagne
100 %
100 %
ESI Nordics AB
December 2011
Gôteborg, Suède
100 %
100 %
OpenCFD Ltd.
September 2012
Berkshire, Angleterre
100 %
100 %
ESI Services Vietnam Co., Ltd.
December 2013
Ho Chi Minh City, Vietnam
100 %
100 %
ITI GmbH
January 2016
Dresde, Allemagne
— %
100 %
ITI Southern Europe SARL
January 2016
Rungis, France
— %
100 %
Entities accounted for using the equity method
JV AECC-ESI (Beijing) Technology Co., Ltd.
February 2014
Pékin, Chine
35 %
35 %
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NOTE 4.
Operating data
NOTE 4.1.
REVENUE
ESI Group revenue derives from two activities: software licensing and
related maintenance, and services.
The Company accounts for a contract with a client when there is a
written agreement that creates legally enforceable rights and
obligations, including payment terms, when the contract has
commercial substance and when collection consideration is probable.
A performance obligation is a promise in a contract with a client to
transfer products or services that are distinct from the other
promises of the contract.
Revenue is recognized when, or as, control of a promised product or
service is transferred to a client, in an amount that reflects the
consideration to which the Company expects to be entitled in
exchange for those products or services.
/ Software licensing and maintenance
Licensing revenue is generated from royalties paid under licensing
agreements granted to end customers and related maintenance
services. Maintenance services include updates and technical
support.
Revenue is split between three types of contracts:
■Lease of annual renewable licenses that include the right to use
the software plus maintenance services for one year;
■Lease of “paid up licenses” conferring to end clients the right to
use the software for unlimited duration, with one year of
maintenance services – with the possibility of renewal through a
maintenance contract;
■Maintenance services alone – this contract completes “paid up
licenses” contracts.
In compliance with IFRS 15, ESI’ customer contracts have been
analyzed in five stages in order to identify the component of the
performance obligations and the price of each. Two performance
obligations have been identified: access to the software (the licensing
itself) and the maintenance service – please note that this distinction
has been applied by the Group prior the entry into force of the
standard. For the annual licensing contracts and the “paid up
licenses”, the allocation of the price has been realized according to
the residual approach.
As a result, 15% of the price of annual licensing contracts and 5% of
the price of “paid up licenses” contracts have been allocated to
maintenance service. Revenue for the access to the license is
recognized at a point in time at the moment when control is
transferred to the client, and the revenue from maintenance service
is recognized on a straight-line basis over the one-year term of the
support agreement.
/ Services
Service revenue consists mainly of consulting and training fees.
The consulting revenue is recognized according to the percentage of
completion method. Corresponding costs are recorded as soon as
they are incurred. Contracts with a probable final loss are covered by
a provision for loss on completion, recorded as a liability on the
balance sheet. The loss is fully provisioned as soon as it is known and
reliably estimated, regardless the stage of completion.
Revenue for training is recognized upon completion.
/ Backlog (IFRS 15)
The Group’s backlog for licensing activity is composed of all signed
orders received from customers at the closing date, with execution
starting from the first day of next fiscal year.
Despite most of licensing contracts are renewable from a fiscal year
to the next one, only signed orders for next year are included in the
backlog. As purchase order are often signed by customers just before
start of the execution period, this explain the level of backlog vs. high
recurring part of licensing contracts.
For services activity, backlog is composed of work to be done on
contracts being executed, and of contracts signed at closing date
which execution has not started yet.
(In € thousands)
December 31, 2022
December 31, 2021
after reclassification
Total licenses and maintenance
113,957
111,356
Consulting
18,648
20,773
Other revenue
1,313
449
Total services
19,961
21,222
CONSOLIDATED REVENUE
133,918
132,578
Backlog as of December 31, 2022 amounts to €15 million for
Licensing (compared with €40 million in 2021) and €1 million for
Services (compared with €2 million in 2021).
Revenue realized with Group twenty top customers amounts to
€67 million (compared with €66 million in 2021), representing 50%
of total revenue, out of which €55 million for Licensing activity
(compared to €53 million in 2021) and €12 million for Services
activity (versus €13 million in 2021). These are mainly customers
from the automotive sector.
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As part of the implementation of its new OneESI 2024 strategy, the
Group has reassessed the nature of the services provided under
the Co-funded Projects: this work, corresponding to research
projects eligible to grants from public organizations, does not
constitute services from the entity's ordinary activities, The
corresponding revenue has therefore been reclassified from the
the “Co-financed projects” line within revenues as a reduction in
research and development expenses. Correspondingly, costs
incurred in connection with “Co-financed projects” have been
reclassified from cost of sales to research and development
expenses.
The impact of the retrospective application of this reclassification is
as follows:
Income statement after reclassification
________
(In € thousands)
Dec. 31, 2021
Published
Reclassification -
the co-financed
projects
Dec. 31, 2021
After
reclassification
REVENUE
136,595
(4,017)
132,578
Cost of sales
(33,717)
4,017
(29,701)
Research and development costs
(31,302)
0
(31,302)
CURRENT OPERATING RESULT
71,576
0
71,576
The revenue of the Group is subject to seasonality, with a concentration of licensing contracts starting at the start of the year. Consequently
first half revenue is significantly higher than the one in second half.
NOTE 4.2.
TRADE RECEIVABLES
Trade receivables are initially recorded at their nominal value, as the
potential impact of discounting is immaterial. They are then recorded
at amortized cost, reduced when applicable by impairment resulting
from non recoverable amounts and estimate of future losses.
Receivables are depreciated when their net realizable value,
estimated by reference to the risk of non-recovery as determined by
type of receivable, is less than their carrying amount. Depending on
the nature of receivables, the risk associated with bad debts is
appreciated individually or based on statistical methods. Impairment
of trade receivables represents best estimate of the risk related to the
asset.
/ Contract assets and liabilities
After having delivered its services, the Group records the customers
counterparty either as trade receivables or as contract assets. A trade
receivable is an unconditionnal right to be paid, while a contract asset
is a right to be paid which is conditionned to factors other than time.
Contract assets are related to amounts to be invoiced on contracts
with milestones or subject to customer’s acceptance.
When invoiced amounts exceed recognised revenue, difference is
recorded as contract liabilities.
Details of trade receivables
________
(In € thousands)
December 31, 2022
December 31, 2021
Trade receivables
41,544
40,204
Depreciation of trade receivables
(4,401)
(4,656)
TOTAL TRADE RECEIVABLES, NET OF IMPAIRMENT
37,142
35,548
(In € thousands)
December 31,
2021
Consolidation
scope change
Provisions
Reversals
Foreign
exchange gain/
loss
Other
movements
December 31,
2022
Depreciation
(4,656)
—
(940)
1,196
(1)
—
(4,401)
TOTAL
(4,656)
—
(940)
1,196
(1)
—
(4,401)
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The Group’s clientele mainly comprises:
■Major industrial corporations, especially companies in the
automotive, aerospace and steel industries;
■Government agencies for governmental and defense projects;
■Academic bodies.
(In € thousands)
December 31,
2022
December 31,
2021
Not due
20,474
28,096
0 to 30 days
8,567
1,199
30 to 90 days
1,924
1,000
Higher than 90 days
6,177
5,253
TOTAL
37,142
35,548
The amount of trade receivables due for more than 90 days
includes receivables from Chinese public sector customers, for
which collection time is more important.
/ Contract assets
Contracts relating to the Licensing activity are generally invoiced at
the beginning of the software access period, so this activity does
not generate invoices to be issued or assets on contracts.
The Services activity, corresponding mainly to consulting services, is
subject to various invoicing schedules, defined in the customer
contracts. In the case of invoicing schedules that are misaligned
with completion rate of services, invoices to be issued (in the vast
majority of cases) or contract assets (in rare cases, when
completion milestones require client acceptance) are booked.
NOTE 4.3.
CONTRACT LIABILITIES
Contracts related to the Licensing activity integrating 12-month
maintenance services are invoiced at the beginning of the software
access period, so all the revenue relating to maintenance services
remaining to be performed over the following year therefore
represents contract liabilities, corresponding to deferred revenue.
This principle is also generally applicable to the Services activity,
where invoicing may be subject to a schedule, but where the due
dates generally precede the completion of the services.
For most contracts the usual term of contract liabilities is maximum
one year.
NOTE 4.4.
CURRENT OPERATING EXPENSES
(In € thousands)
December 31, 2022
December 31, 2021
restated
(a)
Other purchases and external expenses
(10,292)
(10,805)
Short-term and low-value assets leases
(1,539)
(1,344)
Fees
(5,472)
(3,333)
Taxes and duties
(372)
(309)
Amortization and provisions
(7,296)
(10,552)
Personnel costs
(b)
(88,686)
(91,343)
Other external expenses and income
(7,609)
(4,030)
TOTAL CURRENT OPERATING EXPENSES
(121,265)
(121,716)
(a)
See note 1.3.
(b)
Details on personnel costs are presented in note 5.2.
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NOTE 4.5.
INFORMATION BY GEOGRAPHIC AREA
Operating segments are the Group’s components which have
isolated financial information available and whose operating
results are regularly reviewed by the Company’s management in
order to evaluate their performance and to decide how
resources are allocated. The Group works in a unique segment,
with close ties between its two-identified business, Licenses and
Services.
In accordance with paragraphs 31-34 of IFRS 8, ESI Group
presents revenue from ordinary activities and non-current assets
by region (the three main regions being EMEA (Europe, Middle
East, Africa), Asia-Pacific and the Americas).
The Group develops sells and provides technical support for its
software which allow engineers to predict and improve, by virtual
tests, the performance and the expected quality of a product.
Revenue is split between regions where it is actually produced.
(In € thousands)
Europe, Middle
East and Africa
Asia-Pacific
Americas
Eliminations
Consolidated
Year ended December 31, 2022
External clients
62,148
49,653
22,116
—
133,918
Affiliate companies
78,081
293
1,213
(79,587)
—
Net sales
140,229
49,946
23,329
(79,587)
133,918
ASSETS ALLOCATED
236,311
52,155
15,658
(104,336)
199,789
Year ended December 31, 2021 restated
External clients
61,860
49,716
21,003
—
132,578
Affiliate companies
69,871
1,957
2,524
(74,352)
—
Net sales
131,731
51,673
23,527
(74,352)
132,578
ASSETS ALLOCATED
236,863
52,268
22,173
(110,697)
200,606
Intra-Group transactions consist mainly of royalties paid by the Group’s subsidiaries. These royalties are proportional to Licensing revenue and
based on a common practice observed between software publishers and distributors within the industry covered by ESI Group.
NOTE 4.6.
OFF-BALANCE SHEET COMMITMENTS RELATED TO OPERATIONAL ACTIVITIES
The rent security deposit with Crédit du Nord established in November 2012 for an amount of €82 thousand expired in fiscal year 2022 and
has been released..
NOTE 4.7.
LEASES
IFRS 16 is a major revision in the accounting of leases. The standard
provides a single lessee accounting model, requiring lessees to
recognize assets and liabilities for all leases. Based on this model, the
amortization of assets is accounted for in operating expense, and the
cost of the debt towards the lessor is accounted for in financial
expense. Under the standard applied on the financial year ended on
January 31, 2019, the rent expense was recorded within the operating
expense.
In accordance with IFRS 16, leases are recognized as property, plant
and equipment under a right-of-use. These contracts are recognized
at the commencement date of the contract for the discounted value
of the minimum lease payments for a liability corresponding to the
lease liabilities due to the lessor. The assets are amortized on a
straight-line basis over the lease term, which corresponds to the non-
cancellable period of each contract,unless the Group is reasonably
certain to exercise the contractual renewal options.
The Group has chosen to use the two exemptions allowed by IFRS 16
and to keep recognition as operating expense for leases with a lease
term no more than 12 months (except for contracts renewable by
tacit agreement) or leases with underlying asset of low value.
The Group has applied, with retroactive effect from January 1, 2019,
the interpretation of IFRS IC relating to assessment of lease terms for
contracts renewable by tacit agreement or without a contractual
expiry date. IFRS IC confirms the need to determine the enforceable
period, taking an economic view, beyond the legal characteristics. The
contracts concerned are essentially real estate leases and vehicule
rentals.
To determine the lease liabilities, the Group has discounted future
lease payments using weighted average marginal borrowing rate of
2.5%.
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In the assets of the balance sheet, the rights of use of leased assets represent a net value of €12.483 million, of which a gross value of
€25.662 million and the amortization of -€13.179 million.
(In € thousands)
December 31,
2021
Increase
Decrease
Others
December 31,
2022
Right-of-use – Gross value
29,402
1,516
(5,252)
(4)
25,662
For offices
26,941
919
(4,340)
(4)
23,516
For cars
2,461
597
(912)
—
2,146
Right-of-use – Amortization
(12,696)
(5,055)
4,569
3
(13,179)
For offices
(11,221)
(4,461)
3,724
3
(11,955)
For cars
(1,475)
(594)
845
—
(1,224)
Right-of-use – Net value
16,706
(3,539)
(683)
(1)
12,483
For offices
15,720
(3,542)
(616)
(1)
11,561
For cars
986
3
(67)
—
922
(In € thousands)
December 31,
2020
Increase
Decrease
Others
December 31,
2021
Right-of-use – Gross value
28,263
5,224
(4,093)
8
29,402
For offices
25,486
4,890
(3,443)
8
26,941
For cars
2,777
334
(650)
—
2,461
Right-of-use – Amortization
(10,522)
(5,736)
3,566
(4)
(12,696)
For offices
(9,189)
(4,943)
2,915
(4)
(11,221)
For cars
(1,333)
(793)
651
—
(1,475)
Right-of-use – Net value
17,741
(512)
(527)
4
16,706
For offices
16,297
(53)
(528)
4
15,720
For cars
1,444
(459)
1
—
986
In the liabilities of the balance sheet, the lease debts are split
between €8.240 million of non-current debts (compared with
€11.818 million in 2021) and €3.896 million of current debts
(compared with €4.552 million in 2021). The significant decrease in
rights of use and lease liabilities observed in 2022 results from the
implementation of the OneESI transformation plan, with a reduction
in the number of cars and shorter periods leases.
Maturity of lease debts as at December 31, 2022:
(In € thousands)
< 1 year
Between 1
and 2 years
Between 2
and 4 years
More than
5 years
December 31,
2022
Debts – leased offices
3,476
4,073
1,432
2,248
11,229
Debts – leased cars
420
316
170
—
906
LEASE DEBTS
3,896
4,389
1,602
2,248
12,135
In the income statement, the restatement of rental expenses
amounted to €5.416 million (compared with €6.214 million in 2021),
almost entirely offset by the right-of-use amortization: the impact
on the operational result is +€466 thousand (compared with
€477 thousand in 2021). The impact of IFRS 16 restatement on
financial result is an additional expense of -€467 thousand
(compared with -€374 thousand in 2021). The impact on the result
net is a thousand euro (compared with +€103 thousand in 2021).
In the cash flow statement, IFRS 16’s impact is an increase of
amortization and an improvement of cash flow amounted to
+€4.949 million (compared with +€5.639 million in 2021), against a
reimbursement of lease debts in the financial part of the cash flow
statement for -€4.949 million (compared with -€5.743 million
in 2021).
NOTE 4.8.
COST OF SALES
The cost of sales correspond to costs included in gross margin,
relating to the Licensing and Services activities. It consists mainly of
costs related to teams providing first-level support for Licensing
activity and performing consulting services for Services activity
(direct and indirect costs – salary costs and environmental costs).
Cost of sales also includes external royalties and operational
subcontracting costs.
Cost of sales evolution is not directly proportional to revenue
evolution.
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NOTE 4.9.
OTHER OPERATING INCOME AND EXPENSES
/ Other operating income and expenses
The Other operating income and expenses item includes capital gains
and losses on disposals of tangible and intangible assets, impairment
of assets, restructuring costs, and clearly identified non-recurring
income and expense items that are material to the consolidated
financial statements.
/ Current operating result
Current operating result is calculated from Operating result ("EBIT")
less Other operating income plus Other operating expenses.
(In € thousands)
December 31,
2022
Gain on disposal of intangibles assets
15,940
Restructuring costs related to “OneESI 2024 –
Focus to Grow”
(2,214)
Restructuring in discontinued Russian's
activities
(210)
Other income and expenses
(725)
OTHER OPERATIONAL INCOME
AND EXPENSES
12,791
In fiscal year 2022, the Group realized capital gains on the disposal
of non-strategic assets (CFD, SCILAB) for a total amount of EUR 15.9
million, from which disposal costs were deducted (included in other
income and expenses). The continuation of the “OneESI 2024 –
Focus to Grow” transformation plan initiated in 2021 resulted in
additional restructuring costs (-€2.2 million). The discontinuation of
Russian activities also weighed on other operating expenses.
It is reminded that other operating income and expenses amounted
-€27.4 million in 2021, due to the implementation of transformation
plan « OneESI 2024 – Focus to Grow ». They included -€20.7 million
of assets write-off and -€6.7 million of departure costs.
NOTE 5.
Personnel costs and employee benefits
NOTE 5.1.
HEADCOUNT
Headcount is distributed as follows:
December 31, 2022
December 31, 2021
France
243
302
Rest of the world
742
843
TOTAL
985
1,145
NOTE 5.2.
PERSONNEL COSTS
Personnel costs are presented by destination in the income statement. Their break down by nature is as follows:
(In € thousands)
December 31, 2022
December 31, 2021
Salaries
(66,313)
(71,528)
Payroll taxes
(18,915)
(18,623)
Share-based payments
(3,031)
(681)
Post-employment benefits
(427)
(510)
TOTAL PERSONNEL COSTS
(88,686)
(91,343)
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1
2
3
4
5
6
7
8
9
NOTE 5.3.
PROVISION FOR EMPLOYEE BENEFITS
In certain countries, the Group’s employees benefit from different
pension plans, retirement compensation, length-of-service awards
linked to seniority requirements and additional post-employment
benefits. To cover these benefits, the Group has defined-contribution
plans and defined-benefit plans in place.
A defined-contribution plan is a pension plan into which the Group
pays fixed contributions to a third-party entity. The Group does not
have any obligation other than to pay the premiums, and the
corresponding expense is recorded in the income statement for the
financial year.
A defined-benefit plan is a plan that guarantees a certain level of
benefits in the future depending on salary, age and seniority of the
employee. Such is the case for benefits that may be paid when the
employee retires.
An IFRS IC decision was validated by the IASB in May 2021 concerning
IAS 19 “Employee Benefits” relating to the allocation of employee
benefits to periods of service. Thus, the vesting period is determined
from the date of retirement and no longer from the date of hire for
collective agreements for which rights are defined by seniority. Where
rights are capped, the vesting period is limited to the length of service
required at the time of capping. The methodology used by the Group
to measure its obligations at December 31, 2021 remains unchanged.
For defined-benefit plans, in accordance with IAS 19 R “Employee
Benefits”, obligations are determined using the projected unit credit
method. This actuarial method stipulates that each period of service
entitles the employee to one unit of benefit rights and evaluates each
of these units separately to arrive at a final commitment. These
calculations use assumptions in terms of mortality, staff turnover and
future salary increases.
Defined-benefit pension schemes and long-term benefits recognized
in accordance with IAS 19 R are as follows:
■For France: retirement benefits, supplementary pension plan
provided by an insurance company;
■For South Korea, India and Japan: severance pay owed to
employees upon departure from the Company regardless of
reason for departure, calculated on the basis of length of service
within the Company;
■For Germany: defined-contribution benefits owed to selected
managers.
/ 5.3.1. Actuarial assumptions
Discount rates
December 31, 2022
December 31, 2021
France
3.75%
0.90%
Germany
3.75%
1.05%
Japan
1.02%
0.48%
South Korea
3.70%
2.40%
India
7.30%
7.09%
Discount rates correspond to:
■For France: AA-rate corporate bond rates in the Eurozone, adjusted according to the duration of the Group’s commitments;
■For other counties: rates reported by the central banks.
Rate of salary increase
December 31, 2022
December 31, 2021
France
3.00%
2.50%
Germany
2.00%
2.00%
Japan
3.00%
3.00%
South Korea
4.50%
4.00%
India
7.50%
7.00%
Turnover rates are calculated per subsidiary and per age group according to the past experience of each subsidiary.
6
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/ 5.3.2. Change in commitment and provisions
Analysis of the variation in the provision recorded in the balance sheet
________
(In € thousands)
December 31, 2022
December 31, 2021
Change in commitments
Commitments at opening
(11,585)
(13,802)
Acquired companies
Costs of services rendered in the period
(901)
(984)
Interest expenses
(194)
(187)
Benefits paid
749
679
Actuarial gains and losses
2,474
1,154
Staff reduction
66
1,539
Foreign exchange gain/loss
291
15
COMMITMENTS AT CLOSING
(9,099)
(11,585)
Change in fair value of assets
Fair value of assets at opening
2,461
2,414
Acquired companies
Yield on assets
107
91
Employer contributions
198
208
Benefits paid
(258)
(297)
Actuarial gains and losses booked in equity
(76)
(11)
Foreign exchange gains and other
(47)
56
FAIR VALUE OF ASSETS AT CLOSING
2,386
2,461
Net expense for the year
Costs of services rendered
(901)
(984)
Finance charges
(86)
(96)
Interest expenses
(194)
(187)
Yield on assets
107
91
Others
27
1,625
NET EXPENSE FOR THE YEAR
(960)
545
Provision recorded in the balance sheet
Commitments financed
(3,068)
(3,874)
Fair value of assets
2,386
2,461
Net commitments financed
(682)
(1,412)
Commitments not financed
(6,032)
(7,711)
PROVISION AT CLOSING
(6,713)
(9,124)
Change in provision
Provision at opening
(9,124)
(11,474)
Net expense for the year
(960)
545
Actuarial gains and losses
2,398
1,143
Employer contributions paid
198
208
Employer Benefits paid
491
382
Foreign exchange gain/loss
244
73
Others
39
PROVISION AT CLOSING
(6,713)
(9,124)
The commitments financed break down as follow by country: 11% in France, 41% in South Korea, 42% in India and 6% in Germany. Employer
contributions correspond to payments made to pension funds.
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9
/ 5.3.3. Sensitivity of commitments to fluctuations in the discount rate
(In € thousands)
December 31, 2022
Commitment -0.5%
(9,484)
Commitment
(8,786)
Commitment +0.5%
(8,176)
(In € thousands)
December 31, 2022
Experience adjustment
922
Change in financial assumptions
1,441
Change in demographic assumptions
110
Yield on assets
(76)
TOTAL ACTUARIAL GAINS/LOSSES
2,398
NOTE 5.4.
SHARE-BASED PAYMENTS
Stock options may be granted to selected Group employees. They
entitle employees to subscribe to new shares or to existing shares
of ESI Group four or five years after stock options are awarded at a
fixed exercise price set on the award date. Criteria for the granting
of
stock
options
may
include
performance
requirements,
additionally to continued employment requirement.
In accordance with IFRS 2, options are measured at the fair value of
the benefit granted to the employee, estimated at grant date. They
are recorded as personnel costs in the income statement on a
straight-line basis over the vesting period of the option, offset against
equity. The expense is recorded in the income statement per
destination according to the allocation of each concerned person.
The fair value of the option is determined using the “Black-Scholes”
model, the main parameters of which include: the exercise price of
the options, their expected life period, share price at grant date, the
inherent volatility of the share price and the risk-free interest rate.
Free shares may also be awarded to Group employees. The fair value
of the benefit granted is determined based on the share price on the
day of the award multiplied by the number of shares awarded. This
cost is recorded on a straight-line basis over the vesting period.
/ Terms and conditions of stock options and free shares plans
Stock options and free share plans have been authorized by various General Meetings and could potentially dilute ESI Group’s capital.
The tables below describe ongoing plans.
Stock options
Plan number (date
of General Meeting)
Date of Board of
Directors
Number of
attributable
options
granted
Number of
options
granted
O/w
performance
shares
Exercise
price
Number of
options
exercisable at
December 31,
2022
Limit year
for
exercising
options
Plan 10 (GM 2012)
12/19/2012
150,850
62,300 27,820.00
2021
Plan 10 bis (GM 2012)
02/07/2014
11,000
24,420.00
—
2022
Plan 10 ter (GM 2012)
03/26/2015
15,000
21,660.00
2025
Plan 10 quater (GM 2012)
07/22/2015
3,150
27,170.00
—
2025
Total GM 2012
180,000
180,000
62,300
—
Plan 17 (GM 2014)
07/22/2015
7,350
27,170.00
2023
Plan 17 bis (GM 2014)
03/11/2016
10,000
23,350.00
2026
Plan 17 ter (GM 2014)
05/05/2017
18,175
50,920.00
8,500
2025
Plan 17 quater (GM 2014)
05/05/2017
1,875
1,875 50,920.00
2025
Total GM 2014
180,000
37,400
1,875
8,500
Plan 19 (GM 2017)
07/18/2018
43,950
32,963 42,970.00
5,315
2026
Plan 19 bis (GM 2017)
02/01/2019
20,000
15,000 27,040.00
5,000
2027
Plan 19 ter (GM 2017)
12/18/2019
25,785
29,120.00
16,810
2027
Total GM 2017
180,000
89,735
47,963
27,125
Plan 21 (GM 2021)
09/10/2021
24,000
14,400
60.47
—
2029
Plan 21 bis (GM 2022)
28/06/2022
36,000
21,600
64.78
2030
Plan 21 ter (GM 2022)
28/06/2022
9,150
4,575
64.78
2030
Total GM 2020
300,000
69,150
40,575
—
TOTAL STOCK-OPTIONS
840,000
376,285
152,713
35,625
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Free shares
Plan number (date
of General Meeting)
Date of
Board of
Directors
Authorized
number of
shares
Number of
shares
granted
O/w
performance
shares
Number of
shares in
progress at
December 31,
2022
End of
vesting
period
Plan No. 9 (GM 2018)
07/18/2018
60,000
10,617
7,964
—
2021
Plan No. 9 bis (GM 2018)
07/18/2018
2,441
2020
Plan No. 9 ter (GM 2018)
07/18/2018
15,500
—
2022
Plan No. 9 quater (GM 2018)
07/18/2018
16,250
1,166
2023
Plan No. 9 quinquies (GM 2018)
12/18/2019
6,337
—
2022
Plan No. 9 sexies (GM 2018)
12/18/2019
2,521
—
2021
Plan No. 9 septies (GM 2018)
03/19/2020
5,000
5,000
2023
Plan No. 10 (GM 2020)
06/25/2020
60,000
3,000
2023
Plan No. 10 bis (GM 2020)
06/10/2021
7,000
2,000
2023
Plan No. 10 ter (GM 2020)
10/04/2021
8,122
4,061
8,122
2025
Plan No. 10 quater (GM 2020)
10/04/2021
3,255
2,820
2024
Plan No. 10 quinquies (GM 2020)
10/04/2021
15,250
15,250
2025
Plan No. 10 sexies (GM 2020)
10/04/2021
716
555
2025
Plan No. 10 septies (GM 2020)
10/04/2021
8,331
7,215
2024
Plan No. 10 octies (GM 2020)
11/19/2021
4,000
2,000
—
2025
Plan No. 10 novies (GM 2020)
11/19/2021
10,000
—
2025
Plan No. 11 (GM 2022)
06/28/2022
120,000
10,035
5017
10,035
2024
Plan No. 11 bis (GM 2022)
06/28/2022
25,349
25,349
2024
Plan No. 11 ter (GM 2022)
06/28/2022
660
531
2024
Plan No. 11 quater (GM 2022)
06/28/2022
7,620
7,620
2024
Plan No. 11 quinquies (GM 2022)
06/28/2022
4,800
2400
4,800
2024
Plan No. 11 sexies (GM 2022)
06/28/2022
11,874
11,874
2024
Plan No. 11 septies (GM 2022)
06/28/2022
5,233
5,233
2024
Plan No. 11 octies (GM 2022)
06/28/2022
13,750
13,750
2026
Plan No. 11 nonies (GM 2022)
11/17/2022
2,500
2,500
2026
TOTAL FREE SHARES
240,000
200,161
21,442
123,820
The total expense related to stock-options plans for the financial
year ended December 31, 2022 stands at €429 thousand, vs.
€115 thousand for the previous year. That related to free shares
plans stands at €2,603 thousand, vs. €566 thousand in 2021.
All stock options and free shares plans include a continued
employment requirement.
/ Movements in stock options
2022
2021
Numbers
of options
Weighted
average exercise
price
Numbers
of options
Weighted
average exercise
price
Stock options existing at the opening
108,861
42.01
120,810
34.36
Stock options granted
45,150
64.78
24,000
60.47
Stock options expired or canceled
(37,761)
35.18
(8,400)
30.80
Stock options exercised
(11,475)
37.53
(27,549)
27.52
Stock options existing at the closing
104,775
54.10
108,861
42.01
OPTIONS THAT MAY BE EXERCISED AT THE CLOSING
35,625
36.26
22,164
38.54
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2
3
4
5
6
7
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9
/ Fair-value of stock options and free shares
The main data and assumptions underlying the valuation of stock options at fair value were as follows:
Stock options
price at grant
date
Expected term
of stock options
(in years)
Volatility
Dividend
rate
Interest
rate
Plan 10 (02/01/2013)
26,990.00
5
24.80%
0%
1.30%
Plan 10 bis (02/07/2014)
24,500.00
5
23.73%
0%
0.30%
Plan 10 ter (02/01/2015)
24,940.00
6
22.13%
0%
0.36%
Plan 10 quater (07/22/2015)
28,310.00
6
23.36%
0%
0.65%
Plan 15 (02/01/2015)
24,940.00
6
23.36%
0%
0.65%
Plan 17 (07/22/2015)
28,310.00
6
22.13%
0%
0.36%
Plan 17 bis (03/11/2016)
24,390.00
7,5
22.79%
0%
0.65%
Plan 17 ter (05/05/2017)
55,560.00
5,5
28.16%
0%
0.86%
Plan 17 quater (05/05/2017)
55,560.00
5,5
28.16%
0%
0.86%
Plan 19 (07/18/2018)
42,970.00
5,5
37.33%
0%
0.66%
Plan 19 bis (02/01/2019)
27,040.00
5,5
34.56%
0%
0.61%
Plan 19 ter (12/12/2019)
29,120.00
5,5
26.76%
0%
0.65%
Plan 21 (09/10/2021)
60.47
5.2
22.71%
0%
(0.02%)
Plan 21 bis/ter (06/28/2022)
64.78
4.2
28.18 %
0 %
2.13 %
The main data and assumptions underlying the valuation of free shares at fair value were as follows:
Stock options price
at grant date
Period of non-
transferability after
acquisition
(in years)
Interest
rate
Plan 9/9 bis/9 ter (Board of 07/18/2018)
42.97
1 à 3
0.95%
Plan 9 quater
31.40
1 à 2
0.70%
Plan 9 quinquies/9 sexies
31.00
2
0.65%
Plan 9 septies
33.50
0
0.65%
Plan 10
35.40
0 à 2
0.80%
Plan 10 bis
59.00
0
0.65%
Plan 10 ter/10 quater/10 quinquies/10 sexies/10 septies
68.40
0 à 4
1.00%
Plan 10 octies/10 novies
71.00
0
0.60%
Plan 11/11 bis/ 11 ter/11 quater/11 quinquies/11 sexies/11
septies/11 octies
65.00
0 à 4
1.20%
Plan 11 nonies
73.00
0
2.00%
6
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CONTENTS
NOTE 6.
Intangible and tangible assets
NOTE 6.1.
INTANGIBLE ASSETS
Development costs
Research costs borne to gain new scientific or technical knowledge
are recorded as expenses when incurred.
Development costs are capitalized in situations where the six
requirements set forth under IAS 38, “Intangible Assets”, are met:
■Technical feasibility of completing the development project has
been established;
■The Group intends to complete the project;
■The Group will be able to use or sell the product arising from the
research and development project;
■The product is likely to generate future economic benefits, and a
market exists for this product;
■There are appropriate technical, financial and other resources
available to complete the research and development project and
to sell the resulting product;
■Ability to reliably estimate expenditures attributable to the
development project.
The expenses thus converted into assets principally include the cost
of direct labor as well as sub-contracting related to the creation of
new offerings or major improvements to existing solutions.
Capitalized expenses are amortized on a straight-line basis over a
period of 12 months for development work that leads to the yearly
release of new annual versions of software packages sold by the
Group, and on a straight-line basis over 24 or 36 months for
development work that leads to major improvements to existing
products, depending on the degree of innovation. The amortization
period is estimated on a project-by-project basis according to the
period during which ESI Group expects to generate revenue from the
corresponding solution. An impairment of the net book value of
capitalized development costs is recognized when, at the balance
sheet date, the probable future economic benefits are no longer
sufficient to cover the assets residual value.
Research and development costs that do not meet IAS 38 criteria are
recorded as expenses when incurred.
In certain cases, research and development costs entitle the Group to
a tax credit, recorded during the financial year when expenses were
incurred. These tax credits are deducted from research and
development costs.
Acquired codes and other intangible assets
Intangible assets with a finite useful life consist mainly of acquired
software. In accordance with IAS 38, they are valued at cost.
An amortization is recorded in the income statement based on the
estimated useful life of the asset, according to the following criteria:
The period and method of amortization for acquired codes and other
intangible assets with a finite useful life are re-measured at the end of
each period or more frequently. Any change in the estimated useful
life or the expected pattern of consumption of the future economic
benefits embodied in the asset are recorded by modifying the period
or method of amortization. The impact of such change is accounted
for prospectively as a change in estimate.
Amortization costs of acquired codes and other intangible assets with
finite useful lives are recorded in the income statement under the
category of expense related to the function of the intangible asset.
Method
Useful life
Office and similar software applications
Straight-line
1 to 3 years
Other operational software
Straight-line
3 to 5 years
Codes – third-party software integrated
into products
Straight-line
5 to 8 years
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3
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9
/ 6.1.1. Change in the gross value, amortization and net value of intangible assets
(In € thousands)
December 31,
2021 restated
(a)
Increase
Decrease
Foreign
exchange gain/
loss
Other
movements
December 31,
2022
Gross values
Development costs
62,310
24,807
(31,371)
—
—
55,746
Acquired codes
14,082
—
(4,985)
—
(1,535)
7,563
Other intangible assets
13,586
300
(143)
219
1,552
15,513
TOTAL
89,979
25,107
(36,499)
219
17
78,823
Amortization
—
Development costs
(30,232)
(23,958)
29,079
—
—
(25,112)
Acquired codes
(6,274)
(745)
623
—
113
(6,282)
Other intangible assets
(12,988)
(1,054)
98
(219)
(113)
(14,275)
TOTAL
(49,494)
(25,757)
29,800
(219)
—
(45,669)
Net carrying amounts
Development costs
32,080
849
(2,292)
—
—
30,636
Acquired codes
7,808
(745)
(4,362)
—
(1,422)
1,280
Other intangible assets
598
(754)
(45)
—
1,439
1,237
TOTAL
40,487
(650)
(6,698)
—
17
33,154
(a) See note 1.3.
(In € thousands)
December 31,
2020 restated
(a)
Increase
Decrease
Foreign
exchange gain/
loss
Other
movements
December 31,
2021 restated
(a)
Gross values
Development costs
75,783
28,134
(41,608)
62,310
Acquired codes
12,044
(5,129)
7,167
14,082
Other intangible assets
22,362
158
(1,633)
(137)
(7,163)
13,586
TOTAL
110,189
28,293
(48,370)
(137)
4
89,979
Amortization
—
—
Development costs
(28,492)
(28,357)
26,617
(30,232)
Acquired codes
(73)
(641)
73
(5,633)
(6,274)
Other intangible assets
(18,621)
(1,152)
1,019
138
5,629
(12,988)
TOTAL
(47,185)
(30,151)
27,708
138
(4)
(49,494)
Net carrying amounts
Development costs
47,293
(223)
(14,991)
32,080
Acquired codes
11,971
(641)
(5,056)
—
1,535
7,808
Other intangible assets
3,740
(994)
(615)
1
(1,535)
598
TOTAL
63,005
(1,858)
(20,662)
1
—
40,487
(a) See note 1.3.
The main changes in intangible assets result from the capitalization
of development costs (see 6.1.2) and the disposal of non-strategic
intangible assets concluded by the Group in the second half of
2022 (CFD, SCILAB). These transactions mainly impacted the
following items:
■Development costs: decrease in developments in progress
costs ,or a net amount of -€1,747 thousand;
■Acquired codes for a net amount of -€4,226 thousand;
■The Group has also maintained source codes that enable the
continued development of products in these strategic areas,
which are amortized over a period of eight years.
6
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/ 6.1.2. Capitalized development costs
Net impact of the capitalization of development costs
(In € thousands)
December 31, 2022
December 31, 2021
Development costs capitalized during the period
24,082
28,134
Development costs amortized during the period
(23,958)
(28,357)
NET IMPACT OF THE CAPITALIZATION OF DEVELOPMENT COSTS
124
(223)
Releases, which correspond to the commercial launch of new
versions or upgrades to our software, are the result of commercial
and strategic decisions. In some cases, management may decide to
wait until several upgrades have been made before marketing a new
version rather than to release several different versions with minor
upgrades during the year; in other cases, a new version featuring a
major innovation may be marketed even if other improvements are
planned in the near future.
While project releases are generally planned on a yearly basis, the
actual release timeline may vary from one year to the next. These
changes have an impact on amortization start dates and,
consequently, on amortization amounts recorded.
Net value of capitalized developments costs represents 9.7 months of research and development costs (€30.6 million) incurred at
December 31, 2022, compared to 11.7 months (€32.1 million) at December 31, 2021.
Reconciliation of R&D costs incurred and accounted for in the income statement
________
(In € thousands)
December 31, 2022
December 31, 2021
R&D costs incurred during the period
(a)
(37,915)
(32,976)
Development costs capitalized during the period
24,082
28,134
Development costs amortized during the period
(23,958)
(28,357)
French R&D tax credit
2,582
3,026
Amortization of codes acquired in business combinations
(903)
(1,129)
TOTAL R&D COSTS RECOGNIZED AS EXPENSES DURING THE FINANCIAL YEAR
(36,112)
(31,302)
(a)
Including €13.8 million in expenses accounted for as direct costs in 2022 compared to €4.8 million in 2021, reflecting the increased of R&D effort combined with a
decrease in capitalized amounts.
NOTE 6.2.
PROPERTY, PLANT AND EQUIPMENT
/ 6.2.1. Accounting principles
In accordance with IAS 16 “Property, Plant and Equipment”, these
assets are valued at cost. They are not subject to any type of
revaluation. Amortization is recorded in the income statement based
on the estimated useful life of the asset, according to the following
criteria:
Method
Useful life
Fixtures and fittings
Straight-line
5 to 10 years
Computer hardware
Straight-line
3 to 5 years
Office furnishings
Straight-line
5 to 10 years
FINANCIAL STATEMENTS
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CONTENTS
1
2
3
4
5
6
7
8
9
/ 6.2.2. Change in the gross value, amortization and net value of property, plant and equipment
(In € thousands)
December 31,
2021
Increase
Decrease
Other
movements
Foreign
exchange
gain/loss
December 31,
2022
Gross values
Fixtures and fittings
3,676
18
(179)
(6)
(47)
3,462
Computer hardware
14,897
1,543
(573)
33
(63)
15,836
Office furnishings
and other tangible assets
3,268
52
(182)
(44)
2
3,096
TOTAL
21,841
1,613
(934)
(17)
(108)
22,394
Amortization
Fixtures and fittings
(2,097)
(266)
168
20
16
(2,161)
Computer hardware
(12,945)
(1,050)
530
(40)
47
(13,459)
Office furnishings
and other tangible assets
(2,703)
(156)
169
19
(3)
(2,675)
TOTAL
(17,746)
(1,472)
866
(1)
61
(18,294)
Net carrying amounts
Fixtures and fittings
1,579
(248)
(11)
14
(31)
1,302
Computer hardware
1,949
494
(44)
(7)
(15)
2,377
Office furnishings
and other tangible assets
565
(105)
(13)
(26)
(1)
421
TOTAL
4,094
141
(68)
(18)
(48)
4,100
(In € thousands)
December 31,
2020
Increase
Decrease
Other
movements
Foreign
exchange
gain/loss
December 31,
2021
Gross values
Fixtures and fittings
4,589
212
(1,163)
25
13
3,676
Computer hardware
15,443
947
(1,739)
(7)
253
14,897
Office furnishings
and other tangible assets
3,811
43
(427)
(221)
62
3,268
TOTAL
23,843
1,202
(3,329)
(202)
328
21,842
Amortization
Fixtures and fittings
(2,687)
(302)
931
(23)
(16)
(2,097)
Computer hardware
(13,334)
(1,140)
1,743
(7)
(207)
(12,945)
Office furnishings
and other tangible assets
(3,125)
(205)
461
220
(54)
(2,703)
TOTAL
(19,147)
(1,647)
3,135
190
(277)
(17,746)
Net carrying amounts
Fixtures and fittings
1,902
(90)
(232)
2
(3)
1,579
Computer hardware
2,108
(194)
3
(14)
46
1,949
Office furnishings
and other tangible assets
686
(162)
34
(1)
8
565
TOTAL
4,696
(446)
(195)
(13)
51
4,094
6
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CONTENTS
NOTE 7.
Financing and financial instruments
NOTE 7.1.
FINANCIAL ASSETS AND LIABILITIES
Financial assets and liabilities mainly comprise:
■Non-current
financial
debts,
short-term
borrowings
and
overdrafts, together comprising gross debt – see details in
note 7.1.2;
■Loans and other current financial assets, and cash and cash
equivalents – see details in note 7.1.3 – which added to gross
debt represent net financial debt;
■Derivative financial instruments – see details in note 7.1.4;
■Short-term trade receivables – see details in note 4.2, and short-
term trade payables.
/ 7.1.1. Fair value of financial assets and liabilities
Carrying amount
December 31, 2022
(In € thousands)
Fair value of financial
instruments
measured at
amortized cost
Fair value
through equity
Fair value through
profit and loss
Total
Assets
Deposits and guarantees
5,823
5,823
Derivative assets
181
23
205
Trade receivables
37,142
37,142
Cash and cash equivalents
41,599
41,599
Liabilities
Bank borrowings
34,285
34,285
Derivative liabilities
34
34
Payables
6,859
6,859
Carrying amount
December 31, 2021
(In € thousands)
Fair value of financial
instruments
measured at
amortized cost
Fair value
through equity
Fair value through
profit and loss
Total
Assets
Deposits and guarantees
2,793
0
2,793
Derivative assets
0
229
229
Trade receivables
35,548
35,548
Cash and cash equivalents
30,319
30,319
Liabilities
Bank borrowings
42,785
42,785
Derivative liabilities
4
4
Payables
5,288
5,288
In accordance with IFRS 13, the various valuation techniques for each
financial instrument must be ranked. The different categories are as
follows:
■Level 1: direct reference to quoted (unadjusted) prices accessible
on active markets for identical assets or liabilities;
■Level 2: valuation method based on directly or indirectly
observable data associated with the asset or liability other than the
quoted prices included in level 1 data;
■Level 3: valuation method based on unobservable data.
The fair value of cash and cash equivalents is calculated using level 1.
Derivative instruments (see notes 7.1.4 and 7.3) are valued using level 2.
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1
2
3
4
5
6
7
8
9
/ 7.1.2. Gross financial debt
ESI Group’s main source of financing is the syndicated loan, which
consists of a part reimbursable over several years of €15 million at
end 2022, and of a €10 million revolving credit, not used at end
2022. Yearly instalments of the long-term part are paid on April 30
each year, until April 30, 2025. The syndicated loan remuneration is
based on the Euribor rate and a margin of 2%, 2.25% or 2.5%
depending on the level of the Net financial debt/EBITDA ratio
related to previous year financial statements. The margin applied,
which was 2.25% at the beginning of fiscal 2022, was reduced to
2.00% effective in July 29, 2022.
ESI Board Meeting held on June 22, 2021 validated the extension of
reimbursement of both State-guaranteed loan pursuant to options
proposed by the contracts signed respectively with BPI France
in August 2020 for €1.75 million and with ESI French banking pool in
October 2020 for €12 million. The interest paid on these loans
during the first year corresponds to the sole remuneration of the
State guarantee for ETIs, i.e. 0.5%. Both State-guaranteed loans will
be reimbursed over a five years period, with start of repayment
differed by one year. The fixed interest rates of between 0.75% and
1.95% are specific to each bank and applied to their respective
financing shares.
ESI Group has also taken out other loans, mainly a loan with BPI
France for an initial amount of €4 million, the outstanding capital of
which as at December 31, 2022 amounts to €2.4 million, with
quarterly repayments for a period of five years.
ESI Group also had recourse to a promissory bill at the end of the
year 2021 for an amount of €2.5 million with a variable interest rate
and repaid it in February 2022.
Costs related to the set up of syndicated loan and State guaranteed
loans are presented in the tables here below as a deduction of
related financial debt.
All financial debts are denominated in euros.
Detail and maturity of financial debt
As of December 31, 2022
Maturity at December 31
(In € thousands)
2023
2024
2025
2026
2027 and
beyond
Total
Syndicated loan
5,000
4,823
4,891
—
14,714
Short-term revolving loan
—
—
—
—
—
—
State-guaranteed loans
3,438
3,304
3,425
3,428
13,595
Other bank borrowings
2,470
800
800
—
—
4,070
Repayable advances
513
283
340
281
471
1,887
Other financial debts
19
—
—
—
—
19
TOTAL
11,439
9,209
9,456
3,709
471
34,285
CURRENT: 11,439
NON-CURRENT: 22,846
As of December 31, 2021
Maturity at December 31
(In € thousands)
2022
2023
2024
2025
2026 and
beyond
Total
Syndicated loan
5,000
4,823
4,911
4,973
—
19,707
Short-term revolving loan
—
Other bank borrowings
109
3,413
3,425
3,425
3,319
13,691
Factoring of French R&D 2016
tax credit
3,600
2,375
800
800
—
7,575
Repayable advances
205
283
340
281
664
1,773
Other financial debts
39
39
TOTAL
8,954
10,894
9,476
9,479
3,983
42,785
CURRENT: 8,954
NON-CURRENT: 33,832
6
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CONTENTS
Financial debt by type of interest rate and maturity
As of December 31, 2022
Maturity at December 31
(In € thousands)
2023
2024
2025
2026
2027 and
beyond
Total
Fixed-rate debt
5,812
4,104
4,225
3,428
—
17,570
Variable-rate debt
5,000
4,823
4,891
—
—
14,714
No-interest debt
627
283
340
281
471
2,002
TOTAL
11,439
9,209
9,456
3,709
471
34,285
CURRENT: 11,439
NON-CURRENT: 22,845
The following table shows the changes in financial debt in 2022, with a split between flows with cash impact and flows without cash impact.
Flows with cash impact
Flows without cash impact
(In € thousands)
December
31, 2021
New
borrowings Repayment
Other
cash flows
from
financing
activities
Change in
consolidation
scope
Foreign
exchange
gain/loss
Other
movement
December
31, 2022
Syndicated loan
19,705
—
(5,082)
——
—
—
91
14,714
Short-term revolving loan
—
—
—
——
—
—
—
—
State-guaranteed loans
13,693
—
(109)
——
—
—
12
13,596
Other bank borrowings
7,565
—
(3,300)
——
—
—
(196)
4,069
Profit-sharing funds
1,772
133
—
——
—
—
(19)
1,887
Other financial debts
51
—
(11)
——
—
(1)
(20)
19
TOTAL
42,786
133
(8,502)
——
—
(1)
(131)
34,285
/ 7.1.3. Cash and cash equivalents
“Cash and cash equivalents” correspond to cash, bank deposits,
interest-bearing accounts, mutual funds, money market funds and
other liquid and easily convertible investments, subject to an
insignificant risk of changes in value, in accordance with IAS 7.
Group cash position is spread over all entities, nevertheless internal
cash management rules require centralizing cash surpluses at
headquarters when possible. Cash position in countries with local
regulatory constraints on cash transfer are carefully monitored.
In accordance with IFRS 9, marketable securities are recognized at
market value at the closing date. Changes in market value are
recognized in Financial Result.
The Group classifies as cash equivalents no-risk investments in
interest-bearing accounts, commercial paper and certificates of
deposit originally maturing in three months or less and not bearing
any significant interest rate risk.
(In € thousands)
December 31, 2022
December 31, 2021
Cash
30,226
30,319
Marketable securities
11,373
—
TOTAL CASH AND CASH EQUIVALENTS
41,599
30,319
Cash and cash equivalents consist mainly of the euro, Japanese yen,
US dollar, Czech crown and Chinese yuan. Cash items whose
availability for the parent company is not immediate mainly concern
cash in China (€9.5 million).
Marketable securities consist of short-term deposits, secured at
maturity, denominated in euros and US dollars, contracted with
Tier-one French banks institution.
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1
2
3
4
5
6
7
8
9
/ 7.1.4. Financial derivative instruments
The Group uses derivative instruments to manage its exposure to
fluctuations in exchange rates and interest rates. In accordance with
IFRS 9, derivative instruments are recorded at fair value on the
balance sheet.
Changes in fair value of derivative financial instruments are accounted
for as follows:
■Hedges accounting: changes in value are recognized in equity and
reclassified in profit or loss until the effective completion of the
forecast transaction;
■Instruments not qualifying for hedge accounting: changes in fair
value
measurement
of
these
derivative
instruments
are
recognized in Financial Result.
Interest rate instruments
Interest rate swaps signed by ESI Group have always been set up to
hedge the variable interest rate of the syndicated loan.
The syndicated loan signed in December 2018 requires set up of
interest rates hedging instruments for 50% of the outstanding loan.
Two swaps have been setup in the 2022 first semester, with a
nominal value of €3.5 million each, ESI Group receiving variable rate
3-month Euribor (with a 0% floor) and paying a fixed rate of 1.249%
and 1.360% respectively. At the end of 2022, the underlying assets
covered by each of these contracts amounted to €3.5 million. These
financial instruments are accounted for as cash flow hedges.
Foreign exchange instruments
In order to manage foreign currency risk on cash flows between the
Group’s parent company and its subsidiaries, ESI Group may
purchase foreign currency options at any time and enter into any
other type of foreign exchange contract. Foreign exchange
instruments in place as of December 31, 2022 concerned Japanese
yen (FX forward with a nominal of JPY 1.7 billion), Korean won (non-
deliverable FX forward with a nominal amount of KRW 1.8 billion)
and Indian rupee (non-deliverable FX forward with a nominal
amount of INR 500 million). These financial instruments are
accounted for at fair value through profit or loss.
NOTE 7.2.
FINANCIAL INCOME AND EXPENSES
(In € thousands)
December 31, 2022
December 31, 2021
Interest and related expenses on borrowings
(666)
(714)
Interest income
91
13
Foreign exchange gain/(loss)
298
1,041
Interest for provisions for employee benefits
(86)
(96)
Interest for rights-of-use assets
(467)
(374)
Other financial expenses
(482)
(753)
FINANCIAL RESULT
(1,312)
(883)
The positive foreign exchange result is mainly due to the revaluation at closing rate of the accounts payables and receivables.
6
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CONTENTS
NOTE 7.3.
RISK MANAGEMENT POLICY
/ Country risk and foreign currency risk
During the financial year ended December 31, 2022, 46.4% of the
Group’s revenue was generated in Europe, 37.1% in Asia (mainly
Japan, South Korea, China and India) and 16.5% in the Americas
(mainly the United States). The Group is thus exposed to economic
and political uncertainties in these areas.
The Group is also highly exposed to risks stemming from changes in
foreign exchange rates: for the financial year ended December 31,
2022, 46.2% of revenue was generated in EUR, 19.4% in USD (US
dollar), 19.4% in JPY (Japanese yen), 3.9% in KRW (Korean won) and
2.8% in CZK (Czech koruna).
Furthermore, 59.4% of costs are spent in EUR, 12.7% in USD, 8.3%
in JPY, 6.6% in INR (Indian rupee), 2.2% in KRW, 3.7% in CZK and
2.5% in GBP (Great Britain Pound).
The following table shows the results of sensitivity analysis of EBIT
to exchange rate fluctuations. The assumption is a 10% decline in
the average exchange rate applied to all transactions (purchases
and sales), with respect to the principal currencies to which the
Group is exposed.
Currency
Average consolidation
exchange rate
Exchange rate
used for analysis
Effect on Current
Operating Result
(in € millions)
JPY
138.01
151.81
(1.5)
KRW
1,358.07
1,493.88
(0.2)
CZK
24.56
27.02
0.1
USD
1.05
1.16
(1.0)
INR
82.71
90.99
0.6
CHF
1.01
1.11
—
Forex hedging instruments are described in note 7.1.4.
/ Interest rate risk
Most of the Group’s financial debts feature variable interest rates.
To limit the negative impacts of rate fluctuation, the Group applies a
non-speculative management policy, using derivatives described in
note 7.1.4.
Sensitivity analysis to interest rate risk
The only debts included in the calculation of interest rate sensitivity
are those with variable interest rates. These are mostly bank loans
for which drawdown and repayment are left to the borrower’s
discretion.
The
calculations
of
foreign-exchange
sensitivity
presented below assume that financial debts remain stable at
December 31, 2022 levels, meaning a fixed level of drawdown on
bank loans as of that date.
The table below simulates the effects in terms of outflows of interest rates rising and falling by 1%:
(In € thousands)
<1 year
≥1 year, <5 years
≥5 years
Total
Variable rate financial liabilities*
(5,000)
(9,714)
—
(14,714)
Variable rate financial assets
Off-balance sheet commitments
(7,932)
(7,932)
NET POSITION
(5,000)
(17,645)
—
(22,645)
Sensitivity to a 1-point decrease
154
Sensitivity to a 1-point increase
(154)
* Excluding currency hedges.
/ Equity risk
In accordance with IAS 32, treasury shares are accounted for as
part of consolidated shareholder equity and variations in value are
not recorded. When treasury shares are acquired or sold,
shareholder equity is adjusted to reflect the value of the shares
acquired or sold. note 9.1 contains a detailed description of
changes in treasury stock, whether in the context of a liquidity
agreement or intended to cover stock options and free
share grants.
As part of its cash flow management strategy, the Group does not
directly hold any other listed stock and does not invest in equity-
dominated or equity-benchmark UCITS. Thus, the Group’s net
financial income is not directly or significantly affected by variation
in any given stock or market index.
/ Liquidity risk
The Company has specifically reviewed its liquidity risk and it
considers itself to be in a position to satisfy future payment
obligations. The ratio to be maintained with regard to the
syndicated loan contract entered into in December 2018 is detailed
in note 7.4.
FINANCIAL STATEMENTS
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CONTENTS
1
2
3
4
5
6
7
8
9
NOTE 7.4.
OFF-BALANCE SHEET COMMITMENTS RELATING TO GROUP FINANCING
As part of the credit agreement dated December 20, 2018, ESI
Group granted a pledge of 99.98% of the shares of the French
subsidiary Engineering System International and 100% of the shares
of the German subsidiaries ESI Software Germany GmbH and ESI ITI
GmbH.
In 2022, ESI Group has obtained the agreement of the lenders to
merge the German legal entities in order to simplify its legal
organization. The pledge of shares granted to the lenders now
covers only 100% of the shares of the merging company, ESI
Software Germany GmbH (subsequently renamed ESI Germany
GmbH). The pledge of 99.98% of the shares of the French
subsidiary Engineering System international is unchanged.
As long as it owes an obligation under the agreement or the
security documents, the borrower undertakes, under prepayment
constraint, to comply with the ratio of consolidated net financial
debt divided by consolidated EBITDA as defined in the agreement,
the thresholds to be respected over the term of the syndicated loan
agreement are gradually decreasing. As at December 31, 2022, the
threshold to be respected is 3 : on the basis of the annual
consolidated financial statements, the Group was in compliance
with this ratio.
Off-balance sheet financial commitments also include factoring of
French R&D tax credit receivables of 2019, 2020 and 2021 which
have been respectively factored in 2020 for €2.742 million, in 2021
for €2.831 million and in 2022 for €2.360 million. The terms and
conditions of those factorings justify the non-recognition of those
commitments as financial liabilities on the balance sheet
(deconsolidating contracts).
NOTE 8.
Income tax
NOTE 8.1.
INCOME TAX EXPENSE
Deferred tax assets and liabilities reflect future decreases or
increases in income tax expense to be paid that result, for certain
asset and liability items, from temporary valuation differences
between their carrying amounts and their tax base, as well as from
tax loss and tax credit carryforwards. Deferred tax assets and
liabilities are assessed by tax entity or group based on the tax rates
applicable to the years during which these temporary differences are
likely to be reversed or paid. Deferred tax assets and liabilities are
adjusted for each entity to present either a net asset position or a net
liability position.
Deferred tax assets are only recorded in cases where it is likely that
the future tax savings they represent will be realized. The Group
reviews the probability of future recovery of deferred tax assets on a
periodic basis for each tax entity. In some cases, this review can lead
the Group to derecognize deferred tax assets that it had recognized
in prior years.
The Group has two tax groups:
■In France, with the parent company, ESI Group, as head company;
■In the United Kingdom, with ESI ESI UK as head company.
/ 8.1.1. Income tax expense
(In € thousands)
December 31, 2022
December 31, 2021
restated
(a)
Current taxes
(4,651)
(5,540)
Deferred taxes
(4,184)
4,297
TOTAL
(8,835)
(1,244)
(a) See note 1.3.
6
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CONTENTS
/ 8.1.2. Tax proof
(In € thousands)
December 31, 2022
December 31, 2021
restated
(a)
Net income before taxes
24,229
(17,204)
Including share of profit of associates
99
80
Theoretical tax rate
25.0%
26.5%
Theoretical tax (expense)/benefit
(6,033)
4,580
Permanent differences between net result and taxable income
(1,705)
(3,527)
Impact of liability method
(832)
(591)
Impact of standard tax rate differentials between parent company and subsidiaries
(208)
(67)
Unrecognized deferred tax assets and unused tax losses
(57)
(283)
Other items
—
(1,356)
GROUP INCOME TAX EXPENSE
(8,835)
(1,244)
Effective tax rate
36.61%
7.23%
(a) See note 1.3.
NOTE 8.2.
DEFERRED TAXES
/ Breakdown of deferred taxes by tax base
(In € thousands)
December 31, 2022
December 31, 2021
restated
(a)
Deferred tax assets
Tax loss carryforwards
8,750
12,650
Temporary differences related to tax treatment of maintenance
988
1,035
Provisions for employee benefit commitments
1,593
2,085
Temporary differences related to personnel
Provisions and other adjustments
2,134
3,622
Offset of deferred tax assets/liabilities*
(26)
(1,001)
Method variation
(a)
147
Total deferred tax assets
13,438
18,538
Deferred tax liabilities
Amortization of acquired intangible assets
(25)
(150)
Excess depreciation
(357)
(394)
Other adjustments
355
(457)
Offset of deferred tax assets/liabilities
26
1,001
Total deferred tax liabilities
—
—
NET DEFERRED TAX
13,438
18,538
* For a better understanding of the offsetting of deferred tax assets/liabilities, the Group has added a line and therefore restated the comparative information.
(a) See note 1.3.
Please note that as of December 31, 2022 deferred tax assets and
liabilities are offset at the boundaries of the tax consolidation
groups.
At the end of 2022, tax losses that resulted in the recognition of
deferred tax assets amounted to €34.4 million (€47.7 million at the
end of 2021). They mainly concern companies in the scope of tax
consolidation in France. Tax losses carried forward for which
recovery is not likely over a 5-year horizon amounted to €3.7
million, representing €0.6 million in deferred taxes not recognized
at December 31, 2022.
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CONTENTS
1
2
3
4
5
6
7
8
9
/ Reconciliation of deferred income tax expense on the balance sheet and income statement
(In € thousands)
2022
2021
restated
(a)
Net deferred tax assets at opening (January 1) published
18,538
14,685
Method variation
(a)
111
Net deferred tax assets at opening (January 1) restated
18,538
14,796
Acquired companies
11
(1)
Deferred tax expenses recorded in the income statement
(4,184)
4,297
Deferred tax expenses recognized directly in equity (IAS 19 revised)
(620)
(270)
Foreign exchange gain/loss on deferred tax expenses
(309)
(284)
NET DEFERRED TAX ASSETS AT CLOSING (DECEMBER 31)
13,438
18,538
(a) See note 1.3.
NOTE 9.
Equity and earnings per share
NOTE 9.1.
SHARE CAPITAL RESERVES AND TREASURY STOCK
ESI Group’s share capital is made up of ordinary shares.
The “Currency translation difference” line item in equity is used to
record losses or gains generated by converting the financial
statements of foreign subsidiaries into euros as well as foreign
exchange losses or gains on transactions characterized as long term
investments with foreign subsidiaries.
When the Group buys back its own shares, these shares are recorded
at their net purchase price as treasury stock and deducted from
equity. The proceeds from the sale of treasury stock are accounted
for directly in equity.
/ Share capital
At
December
31,
2022,
ESI
Group’s
share
capital
was
€18.227 million, comprising 6,075,616 common shares with a par
value of €3 each.
/ Dividend payout
ESI Group did not pay out any dividend during the period.
/ Treasury shares
The number of treasury shared increased by 15,287 shares over
the financial year.
The percentage of capital held as self-detention following these
transactions stood at 5.9% at December 31, 2022, compared to
5.7% at December 31, 2021. The Group owns a total of 359,301
treasury shares, purchased at a historical cost of €5.8 million and
with a market value of €26.5 million at the same date. Those shares
are split between treasury shares and liquidity contract.
/ Transactions with non-controlling interests
Transactions with non-controlling interests are recognized directly
in equity. See details in notes 3.1 and 3.2.
NOTE 9.2.
MINORITY INTERESTS
If, in the event of losses, the part of equity corresponding to minority interests becomes negative, it will be retreated so as to be at least equal
to zero.
NOTE 9.3.
EARNING PER SHARE
The table below details the net income (Group share) per share:
(In € thousands)
December 31, 2022
December 31, 2021
restated (a)
NET INCOME (GROUP SHARE)
15,421
(18,575)
Net earnings per share (in €)
2.69
(3.26)
Average number of shares
5,724,205
5,704,319
Diluted earnings per share (in €)
2.63
(3.26)
Average number of diluted shares
5,856,772
5,704,319
(a) See note 1.3.
Only stock options and free shares may have a dilutive effect.
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NOTE 10. Other balance sheet items
NOTE 10.1. OTHER ASSETS
/ 10.1.1. Other non-current assets
(In € thousands)
December 31, 2022
December 31, 2021
Security deposits & hold-back
5,823
2,793
Other long term assets
201
210
Investments in non-consolidated companies
99
99
TOTAL OTHER NON-CURRENT ASSETS
6,123
3,102
Security deposits mainly concern real estate rentals, the factored French R&D tax credit receivables and the remaining receivable balance of
CFD’ sale.
/ 10.1.2. Other current receivables
(In € thousands)
December 31, 2022
December 31, 2021
French R&D tax credit
2,831
3,579
Other tax credits
1,984
163
VAT and other receivables
2,770
2,628
TOTAL OTHER CURRENT ASSETS
7,585
6,370
French R&D tax credit receivable as of December 31, 2022 relates
mostly to costs incurred in 2022.
ESI Group did not use its French R&D tax credit to pay income tax,
thus there is a factoring done on receivables each year. At end 2022
three years of R&D tax credit receivables are factored with a
deconsolidating contract. Consequently, related amounts are
booked in Off-balance sheet financial commitments and not
in financial debt in balance sheet. Amounts involved are French
R&D tax credit receivables of 2019, 2020 and 2021 which have been
respectively factored in 2020 for €2.742 million in 2021 for
€2.831 million and in 2022 for €2.359 million.
/ 10.1.3. Prepaid expenses
Prepaid expenses consist primarily of yearly subscription of software in SaaS mode and insurance contract, which premiums are paid at the
beginning of the year.
NOTE 10.2. OTHER LIABILITIES
/ 10.2.1. Tax payables, employee-related liabilities and other short-term liabilities
(In € thousands)
December 31, 2022
December 31, 2021
Employee-related liabilities
18,403
18,250
Tax payables
7,467
5,979
Other current liabilities
4,404
2,381
TAX PAYABLES, EMPLOYEE-RELATED LIABILITIES
AND OTHER SHORT-TERM LIABILITIES
30,274
26,609
As of December 31, 2022 Tax payables consist primarily of VAT payables for €2.246 million (compared with €3.907 million at end 2021) and a
provision of income tax payable of €4.262 million (compared to €1.277 million in 2021).
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CONTENTS
1
2
3
4
5
6
7
8
9
/ 10.2.2. Provisions
In accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, a provision is recorded when the following three conditions
are met: the Group has an obligation towards a third party resulting from past events, it is probable that future outflows of resources embodying
economic benefits will be necessary to settle the obligation, the amount of the obligation can be estimated in a reliable way.
(In € thousands)
December
31, 2021
Allowance
Reversals
Reclassifications
ST/LT
Foreign
exchange
gain/loss
Other
movements
December
31, 2022
Refurbishment of rented premises
268
149
(22)
(10)
385
Others risks
541
—
—
(25)
(5)
10
520
PROVISIONS AND OTHER
NON CURRENT LIABILITIES
809
149
—
(25)
(27)
—
905
Provisions for risks
(a)
7,129
1,198
(5,858)
25
33
2,527
CURRENT PROVISIONS
7,129
1,198
(5,858)
25
33
—
2,527
(a)
The provision mostly corresponds to severance costs related to “OneESI 2024 – Focus to Grow” plan.
NOTE 11.
Related party transactions
EXECUTIVE CORPORATE OFFICERS’ COMPENSATION
Compensation and benefits paid to the Group’s four executive corporate officers during the financial years ended December 31, 2022
(1 corporate representative) and December 31, 2021 (3 corporate representatives) breaks down as follows:
(In € thousands)
December 31, 2022
December 31, 2021
Fixed compensation
365
793
Variable compensation
—
—
Travel bonus
—
—
Benefits in kind
11
13
Directors’ fees
—
18
TOTAL
376
825
RELATED PARTY TRANSACTIONS
Nothing to report.
NOTE 12.
Fees paid to Statutory Auditors
2022
2021
KPMG
Ernst & Young
Total
KPMG
Ernst & Young
Total
(In € thousands, excluding tax)
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Amount
%
Certification, review of annual and consolidated financial statements
■Parent company
206
75%
226
65%
432
70%
226
86%
198
62%
424
73%
■Fully consolidated subsidiaries
49
18%
102
31%
152
25%
29
11%
110
34%
139
25%
Sub-total
255
93%
329
96%
584
95%
255
97%
308
96%
563
98%
Services other than certification of accounts
■Parent company
36
5%
10
4%
46
4%
7
3%
12
4%
19
2%
■Fully consolidated subsidiaries
8
2%
—
—%
8
1%
—
—%
—
—%
Sub-total
44
7%
10
4%
54
5%
7
3%
12
4%
19
2%
TOTAL
299
100 %
339
100 %
638
100 %
262
100%
320
100%
582
100%
The total budget for certification fees for the parent company and
consolidated financial statements for the financial year ended
December 31, 2022 came to €572 thousand. Services other than
certification of accounts provided to parent company correspond
primarily to certification of costs statements issued for co-financed
projects and of bank covenant calculation.
NOTE 13. Subsequent events
On January 6, 2023, the opening of the liquidation proceedings of ESI Vietnam was pronounced.
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6.1.6. Statutory Auditors’ report on the consolidated financial statements
This is a translation into English of the statutory auditors’ report on the consolidated financial statements of the Company issued in French and it is
provided solely for the convenience of English-speaking users. This statutory auditors’ report includes information required by European regulations
and French law, such as information about the appointment of the statutory auditors or verification of the information concerning the Group
presented in the management report. This report should be read in conjunction with, and construed in accordance with, French law and professional
auditing standards applicable in France.
Year ended December 31, 2022
To the Annual General Meeting of ESI Group,
Opinion
In compliance with the engagement entrusted to us by your Annual General Meeting, we have audited the accompanying consolidated
financial statements of ESI Group for the year ended 31 December 2022.
In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the
Group as at December 31, 2022 and of the results of its operations for the year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union.
The audit opinion expressed above is consistent with our report to the Audit Committee.
Basis for Opinion
/ Audit Framework
We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Statutory Auditors’ Responsibilities for the Audit of the Consolidated
Financial Statements section of our report.
/ Independence
We conducted our audit engagement in compliance with the independence requirements of the French Commercial Code (Code de commerce)
and the French Code of Ethics for Statutory Auditors (Code de déontologie de la profession de commissaire aux comptes) for the period from
January 1, 2022 to the date of our report and specifically we did not provide any prohibited non-audit services referred to in Article 5(1) of
Regulation (EU) No. 537/2014.
Emphasis of Matter
We draw your attention to Note 1.3 “New IFRS Standards and Interpretations” to the consolidated financial statements, which describes the
impacts of the IFRS IC decision issued in April 2021 on the recognition of configuration or customization costs for software used in SaaS mode.
Our opinion is not modified in respect of this matter.
Justification of Assessments – Key Audit Matters
In accordance with the requirements of Articles L. 823-9 and R. 823-7 of the French Commercial Code (Code de commerce) relating to the
justification of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our professional
judgment, were of most significance in our audit of the consolidated financial statements of the current period, as well as how we addressed
those risks.
These matters were addressed in the context of our audit of the consolidated financial statements as a whole and in forming our opinion
thereon, and we do not provide a separate opinion on specific items of the consolidated financial statements.
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CONTENTS
1
2
3
4
5
6
7
8
9
/ Valuation of development costs
Risk identified
Our response
In the consolidated balance sheet, intangible assets include
capitalized development costs for a net carrying amount as at
December 31, 2022 of K€ 30,636. Development costs capitalized
during the financial period amounted to K€ 24,082.
The development costs correspond mainly to direct labor and
subcontracting costs relating to the development of new offers or
major improvements to existing software solutions.
As indicated in Note 6.1 to the consolidated financial statements,
the capitalization of these development costs is subject to
compliance with the criteria set out in IAS 38 “Intangible Assets”.
The amortization times, which are between 12 and 36 months, are
estimated for each project depending on the period during which
your Group expects the software concerned to generate revenue.
Projects corresponding to the development of new software
versions, which are delivered annually, are amortized over 12
months. Projects corresponding to the development of major new
features are amortized over 24 or 36 months depending on the
level of innovation associated.
Impairment of the net carrying amount of the capitalized
development costs is recognized when, at year-end, the probable
future economic benefits are no longer sufficient to cover the
residual value of the asset.
The assessment of the compliance with the criteria for
capitalization of development costs, the determination of the
amortization period, and the identification of impairment indicators
for capitalized projects no longer generating future economic
benefits, are based on Management’s judgment and the reliability
of the procedures applied for the identification and allocation of
the costs between the different projects.
On this basis, we considered the capitalization of development
costs to be a key audit matter.
For a sample of projects developed over the 2022 financial year, we
assessed the compliance of the capitalization criteria on the
balance sheet with the accounting standard in force.
■We reconciled the accounting data with the management data
giving detailed information on the capitalized projects, in order
to assess the reliability of the information reported;
■By sampling, we checked the individual hourly rates used by
your Company to value the hours reported in the capitalized
project calculation file and reconciled these hours with the
timesheets entered by the engineers;
■We verified the correct calculation of the amortization expense
on the basis of the period established for each project by your
Group’s Management and we assessed the reliability the release
date of the projects selected as samples;
■We assessed the overall consistency of the amortization periods
estimated by your Company, particularly in relation to market
references;
■In addition, we assessed that there were no indication of
impairment of the projects capitalized at year-end.
/ Recognition of revenue from software licenses
Risk identified
Our response
A substantial amount of your Group’s revenue results from
software licensing and related maintenance services.
In accordance with IFRS 15, your Group’s contracts are analyzed in
five stages to determine, in particular, the transaction price, the
various service obligations and the allocation of the transaction
price to each of them. Revenue from software licenses derives from
two service obligations: access to the software (royalties for rights
of use granted to end customers), and the related maintenance
service. The share of revenue allocated to maintenance is
determined according to the nature of the license sold, as
described in Note 4.1 to the consolidated financial statements.
The determination of service obligations, the allocation of the
transaction price between the various components of a contract,
and the methods of revenue recognition require in-depth analysis
and a considerable degree of judgment on the part of
Management.
For all these reasons, we considered the recognition of revenue
from software licensing to be a key audit matter.
As part of our audit, we conducted tests on a sample of contracts.
These tests involved in particular analyzing the contractual terms,
recalculating the amount allocated to each component and
examining the amount and accounting period of revenue for each
element in accordance with the accounting principles set out in
Note 4.1 to the consolidated financial statements, whose
compliance with IFRS we assessed previously.
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CONTENTS
Specific Verifications
We have also performed, in accordance with professional standards applicable in France, the specific verifications required by laws and
regulations of the information relating to the Group given in the Board of Directors’ management report.
We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements.
We attest that the consolidated non-financial statement required by Article L. 225-102-1 of the French Commercial Code (Code de commerce) is
included in the information relating to the Group given in the management report, it being specified that, in accordance with Article L. 823-10
of said Code, we have verified neither the fair presentation nor the consistency with the consolidated financial statements of the information
contained therein. This information should be reported on by an independent third party.
Report on Other Legal and Regulatory Requirements
/ Format of preparation of the consolidated financial statements
intended to be included in the annual financial report
We have also verified, in accordance with the professional standard applicable in France relating to the procedures performed by statutory
auditors regarding the annual and consolidated financial statements prepared in the European single electronic format, that the preparation
of the consolidated financial statements intended to be included in the annual financial report mentioned in Article L. 451-1-2, I of the French
Monetary and Financial Code (Code monétaire et financier), prepared under the CEO’s responsibility, complies with the single electronic format
defined in Commission Delegated Regulation (EU) No. 2019/815 of 17 December 2018. Regarding consolidated financial statements, our work
includes verifying that the tagging thereof complies with the format defined in the above-mentioned regulation.
On the basis of our work, we conclude that the preparation of the consolidated financial statements intended to be included in the annual
financial report complies, in all material respects, with the European single electronic format.
Due to the technical limitations inherent to the block-tagging of the consolidated financial statements according to the European single
electronic format, the content of certain tags of the notes may not be rendered identically to the accompanying consolidated financial
statements.
Furthermore, we have no responsibility to verify that the consolidated financial statements that will ultimately be included by your Company in
the annual financial report filed with the AMF (Autorité des marchés financiers) agree with those on which we have performed our work.
/ Appointment of the Statutory Auditors
We were appointed as statutory auditors of ESI Group by your Annual General Meeting held on June 22, 2021 for KPMG S.A. and on December
16, 1997 for ERNST & YOUNG Audit.
As at 31 December 2022, KPMG S.A. was in its second year of total uninterrupted engagement and ERNST & YOUNG Audit in its twenty-sixth
year (including twenty-three years since the securities of the Company were admitted to trading on a regulated market).
Responsibilities of Management and Those Charged with Governance
for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International
Financial Reporting Standards as adopted by the European Union and for such internal control as Management determines is necessary to
enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, Management is responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is expected to
liquidate the Company or to cease operations.
The Audit Committee is responsible for monitoring the financial reporting process and the effectiveness of internal control and risk
management systems and where applicable, its internal audit, regarding the accounting and financial reporting procedures.
The consolidated financial statements were approved by the Board of Directors.
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CONTENTS
1
2
3
4
5
6
7
8
9
Statutory Auditors’ Responsibilities for the Audit
of the Consolidated Financial Statements
/ Objectives and audit approach
Our role is to issue a report on the consolidated financial statements. Our objective is to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material misstatement. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with professional standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users made on the basis of these consolidated financial statements.
As specified in Article L. 823-10-1 of the French Commercial Code (Code de commerce), our statutory audit does not include assurance on the
viability of the Company or the quality of management of the affairs of the Company.
As part of an audit conducted in accordance with professional standards applicable in France, the statutory auditor exercises professional
judgment throughout the audit and furthermore:
■Identifies and assesses the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, designs
and performs audit procedures responsive to those risks, and obtains audit evidence considered to be sufficient and appropriate to
provide a basis for his opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
■Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control;
■Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by Management in the consolidated financial statements;
■Assesses the appropriateness of Management’s use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as
a going concern. This assessment is based on the audit evidence obtained up to the date of his audit report. However, future events or
conditions may cause the Company to cease to continue as a going concern. If the statutory auditor concludes that a material uncertainty
exists, there is a requirement to draw attention in the audit report to the related disclosures in the consolidated financial statements or, if
such disclosures are not provided or inadequate, to modify the opinion expressed therein;
■Evaluates the overall presentation of the consolidated financial statements and assesses whether these statements represent the
underlying transactions and events in a manner that achieves fair presentation;
■Obtains sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. The statutory auditor is responsible for the direction, supervision and
performance of the audit of the consolidated financial statements and for the opinion expressed on these consolidated financial
statements.
/ Report to the Audit Committee
We submit to the Audit Committee a report which includes in particular a description of the scope of the audit and the audit program
implemented, as well as the results of our audit. We also report significant deficiencies, if any, in internal control regarding the accounting and
financial reporting procedures that we have identified.
Our report to the Audit Committee includes the risks of material misstatement that, in our professional judgment, were of most significance in
the audit of the consolidated financial statements of the current period and which are therefore the key audit matters that we are required to
describe in this report.
We also provide the Audit Committee with the declaration provided for in Article 6 of Regulation (EU) No. 537/2014, confirming our
independence within the meaning of the rules applicable in France as set out in particular in Articles L. 822-10 to L. 822-14 of the French
Commercial Code (Code de commerce) and in the French Code of Ethics for Statutory Auditors (Code de déontologie de la profession de
commissaire aux comptes). Where appropriate, we discuss with the Audit Committee the risks that may reasonably be thought to bear on our
independence, and the related safeguards.
Paris-La Défense, 17 March 2023
The Statutory Auditors
French original signed by:
KPMG Audit
Département de KPMG S.A.
ERNST & YOUNG Audit
Stéphanie Ortega
Pierre-Henri Pagnon
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6.2.
ESI GROUP ANNUAL FINANCIAL STATEMENTS
6.2.1. Income statement
(In € thousands)
Notes
December 31, 2022
December 31, 2021
Revenue
E.1
88,496
85,821
Production held as inventory
—
—
Capitalized production
E.2
26,729
30,151
Operating subsidies
—
—
Reversals of provisions and amortization, expense transfers
E.2
5,278
5,477
Other income
E.2
1,112
1,409
Operating income
121,615
122,858
Purchase and change in stock of goods
143
11
Other purchases and external expenses
E.3
52,589
56,888
Taxes and duties
E.4
922
1,287
Wages and salaries
14,502
17,878
Payroll taxes
8,257
8,500
Depreciation and amortization of non-current assets
E.5
27,815
31,686
Provisions
E.5
930
1,983
Other expenses
E.6
2,257
2,262
Operating expenses
107,415
120,495
OPERATING RESULT
14,200
2,363
FINANCIAL RESULT
E.7
16,481
(3,184)
CURRENT RESULT BEFORE TAX
30,681
(821)
EXCEPTIONAL RESULT
E.8
12,447
(30,197)
Employee profit-sharing
(698)
0
Income tax
F.5
(693)
3,026
NET PROFIT (LOSS)
41,737
(27,992)
FINANCIAL STATEMENTS
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CONTENTS
1
2
3
4
5
6
7
8
9
6.2.2. Balance sheet
Assets
(In € thousands)
Notes
December 31, 2022
December 31,
2021
Gross value
Amortization/
Provisions
Net value
Net value
Intangible assets
C.1
72,434
(33,756)
38,678
46,873
Property, plant and equipment
C.2
10,442
(8,280)
2,161
1,888
Financial assets
C.3
57,109
(9,615)
47,494
43,897
Non-current assets
139,985
(51,651)
88,334
92,658
Inventories
—
—
—
Down payments to suppliers
C.4
358
358
414
Trade receivables
C.4
57,435
(3,552)
53,882
51,848
Other receivables
C.4
10,803
(898)
9,905
6,461
Marketable securities
C.5
17,060
17,060
3,663
Cash
9,214
9,214
8,539
Current assets
94,869
(4,450)
90,419
70,925
Prepaid expenses
C.6
3,045
3,045
2,094
Expenses capitalized, to be amortized
C.6
250
250
350
Foreign exchange gains and losses
C.7
2,110
2,110
6,033
TOTAL ASSETS
240,259
(56,101)
184,158
172,060
Liabilities
(In € thousands)
Notes
December 31, 2022
December 31, 2021
Share capital
D.2
18,227
18,193
Additional paid-in capital
39,849
39,516
Legal reserve
1,805
1,809
Retained earnings
(29,735)
(1,746)
Net profit (loss)
41,737
(27,992)
Regulated provisions
1,454
1,513
Equity
D.1
73,337
31,293
Other equity
D.4
1,887
1,772
Provisions for contingencies and charges
D.5
7,243
16,433
Bank borrowings
D.7
32,628
38,825
Miscellaneous financial debt
D.8
—
2,500
Financial liabilities
32,628
41,325
Down payments from clients
D.10
171
72
Trade payables
D.6
44,290
48,775
Tax payables and employee-related liabilities
D.9
11,443
8,502
Other liabilities
D.10
10,719
12,924
Operating liabilities and miscellaneous debts
66,623
70,273
Deferred income
432
3,612
Foreign exchange gains and losses
D.11
2,007
7,352
TOTAL LIABILITIES
184,158
172,060
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CONTENTS
6.2.3. Notes to ESI Group annual financial statements
Table of contents of notes to the annual financial statements
NOTE A.
Significant events of the year
145
NOTE D.
Liability details
154
NOTE B.
Accounting principles and methods
145
NOTE E.
Details on income statement
159
NOTE C.
Asset details
149
NOTE F.
Other information
162
Total balance sheet at December 31, 2022 amounts to
€184.158 million and the income statement for the financial year
shows net profit of €41.737 million.
The financial statements are presented according to the accounting
principles and methods defined by the general accounting chart as
presented by Regulation No. 2014-03 of the Accounting Standards
Authority of June 5, 2014 and supplemented by subsequent
regulations.
All amounts listed in these notes are in thousands of euros unless
otherwise indicated.
The notes below are an integral part of the annual financial
statements.
NOTE A.
Significant events of the year
/ Strategic plan “OneESI 2024 – Focus to Grow”
continued
In 2022, the Group continued to implement the new growth and
profitability plan “OneESI 2024 – Focus to Grow” launched in 2021.
Innovation refocusing on ESI's main sectors resulted in the sale, on
July 13, 2022, of the non-strategic fluid simulation software ("CFD")
for an amount of US$24 million, of which US$20.4 million was
received at closing. The balance is payable within 18 months from
that date, subject of the absence of purchaser's enforcing the
contractual warranties. On July 27, 2022, SCILAB assets were sold
for €0.8 million.
This transformation has resulted in a reduction in headcount in
particular within the framework of the "Employment Protection
Plan" launched at the end of 2021.
Following Russia’s invasion of Ukraine, ESI decided first to suspend
all commercial activity and then to take permanent and strict
measures to definitively stop commercial activity in Russia and
Belarus. These measures have affected the activity of MECAS, a
wholly-owned subsidiary of ESI Group but had no direct impact on
ESI Group's statutory accounts.
/ Changes in scope occurred during the year
During the year ended December 31, 2022:
■In January 2022, ESI Holding (USA) has been merged into ESI
North America (USA);
■In July 2022, ESI ITI GmbH has been absorbed into ESI Software
Germany GmbH (renamed ESI Germany GmbH). This operation,
between two companies fully owned by ESI Group, was carried
out with retroactive effect from January 1, 2022;
■In September 2022, closure of the dissolution of the two Hong
Kong companies: ESI HKE and ESI ATE;
■In December 2022, ESI Group acquired 5% minority share of ESI
MECAS, and now holds 100% of the entity’s shares (Czech
Republic).
Refer to note C.3.
NOTE B.
Accounting principles and methods
The rules and methods remain unchanged compared to last year.
The general accounting conventions have been applied prudently,
in accordance with the following assumptions:
■Basic assumptions:
• going concern,
• consistency in accounting methods from one financial year to
the next,
• independence of financial years;
■General rules for preparing and presenting annual financial
statements: the basic method used to measure accounting
items is the historical cost method;
■In 2022, the Company reassessed the nature of the services
provided under the Co-funded Projects and changed the
accounting classification: this work, corresponding to research
projects eligible to grants from public organizations, does not
constitute services from the entity's ordinary activities. Income
from these projects previously included in revenue is now
presented under other income from operations. In 2021, Co-
funded Projects represented revenues of €1.9 million (€ 1.1
million in 2022).
Consequently, the receivables and payables arising from these
Projects are presented in other receivables and payables as
from fiscal year 2022 (previously presented in trade receivables).
FINANCIAL STATEMENTS
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2
3
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5
6
7
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NOTE B.1.
USE OF ESTIMATES
Preparation of the financial statements requires the use of
estimates and assumptions that may have an impact on the
carrying amount of certain items in the balance sheet or income
statement, as well as the information provided in selected notes. ESI
Group carries out comprehensive reviews of these estimates and
assessments to take account of past experience and other factors
judged relevant with regard to economic conditions.
These estimates, assumptions and assessments are established on
the basis of existing information or situations at the time the
financial statements are drawn up, and which may not reflect future
realities.
These estimates mainly concern provisions for contingencies and
charges and assumptions used for the valuation of equity
investments and accumulated amortization of selected intangible
assets.
NOTE B.2.
INTANGIBLE ASSETS
/ Research and development costs
Internal research and development costs are recorded in the
appropriate expense category; expenses corresponding to research
and development performed by service providers within the Group
or third parties are recorded as subcontracting expenses.
Internal expenses related to development work incurred during the
financial year (wages, payroll taxes and environment-related costs)
are capitalized and recognized as capitalized production.
Capitalization is performed on a per-project basis. Only projects
meeting the criteria for capitalization defined in the regulation on
assets are capitalized as assets. Research projects or the portion of
expenses not meeting all of the criteria continue to be recognized
as expenses in the income statement. Projects that are unfinished
at the closing date are capitalized as work in progress.
Projects involving development of new versions of ESI software
delivered on a yearly basis are amortized over 12 months.
Projects involving the development of new, significant features are
amortized over 24 or 36 months depending on the degree of
innovation.
Amortization starts at release of the version.
If there is a risk that a project will not be marketed, a provision for
depreciation is recorded on developments that will not generate
future economic gains.
At the end of the amortization period, development costs are
removed from the asset line.
/ Other intangible assets
Other intangible assets (patents, software) are amortized according
to the straight-line method according to their estimated useful life.
Office and similar software applications
1 year on
a straight-line basis
Other operational software
3 years on
a straight-line basis
Codes – third-party software integrated
into products
5 to 8 years on
a straight-line basis
These assets are subject to impairment tests if there are signs of
impairment.
NOTE B.3.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are valued at cost (purchase price plus related expenses), and amortized according to expected useful life:
General facilities
6 years on a straight-line basis
Fixtures and fittings, miscellaneous building work
10 years on a straight-line basis
Transportation equipment
5 years on a straight-line basis
Office equipment
3 years on a straight-line basis
New computer equipment
3 - 5 years a straight-line basis
Used computer equipment
1 year on a straight-line basis
Furnishings
5 to 10 years on a straight-line basis
NOTE B.4.
FINANCIAL ASSETS
/ Equity investments and related receivables,
acquisition costs
Equity investments are recorded on the balance sheet at the
historical cost of acquisition of shares.
At the closing date, if the value in use of the shares is less than their
purchase price, a provision is established for the difference. The
value in use is calculated using one of the methods presented here
below according to the situation of the subsidiary:
■Equity investments in active subsidiaries are valued on the basis
of a multiple of revenue adjusted for net cash position of the
subsidiary, or alternatively on the basis of discounted forecasted
cash flows for recently acquired entities;
■Equity investments in dormant subsidiaries or those with
reduced activity are valued on the basis of the share of the net
equity attributable to ESI Group.
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Acquisition costs are recorded as part of the cost of the equity
investments and deducted, for tax purposes, through accelerated
capital allowances, over a period of five years.
Receivables related to equity investments are provisioned if there is
a risk of non-recovery.
/ Other investments
Other investments mainly comprise deposits and factoring
guarantee funds (factoring of receivables from the French R&D
tax credit).
NOTE B.5.
INVENTORIES
/ Supply inventories
Other supply inventories are valued, if any, at cost according to the
first in, first out method.
/ Work in progress
Work in progress corresponds to consulting studies in progress and
valued at production cost with a margin assessed according to the
percentage of completion method.
NOTE B.6.
RECEIVABLES AND DEBTS
Receivables and debts are measured at par value.
A provision for impairment is recognized where the inventory value
of a receivable (excluding advances to subsidiaries), based on the
likelihood of recovery, is lower than its net book value.
All impairment is determined on a case-by-case basis or following
statistical analysis. Regarding advances granted to subsidiaries, the
net book value of these receivables follows the same rules as equity
investments in terms of impairment.
NOTE B.7.
MARKETABLE SECURITIES
Marketable securities are recorded at their net purchase price. If, at
the closing date, the net asset value is lower than the acquisition
value, impairment is recorded for the difference.
At closing date, marketable securities were made up of the
Company’s treasury shares, valued according to “the first in, first
out” method and of cash investments in secured short term
deposits at maturity.
NOTE B.8.
TREASURY SHARES
In the context of the authorizations, limits and objectives set by the
Shareholders’ General Meeting, ESI Group may purchase,
exchange or transfer its own shares.
The recognition and impairment method for treasury shares
depends on the objective underlying the acquisition.
Treasury shares related to the liquidity contract signed by the
Company are recognized as financial assets. Treasury shares
acquired in the context of other objectives set by the General
Meeting (primarily external growth and grants to employees) are
recognized as marketable securities.
Impairment is recorded when the share acquisition cost related to
liquidity contract exceeds the actual value as determined by the
share market price at the closing date.
NOTE B.9.
FOREIGN CURRENCY TRANSACTIONS
Income and expenses in foreign currency are recorded at their
converted value using the exchange rate of the transaction date.
Liabilities, receivables and cash in foreign currency are recorded on
the balance sheet converted at the exchange rate of the closing
date.
The difference resulting from the conversion of the debts and
receivables at the exchange rate of the closing date is recorded on
the balance sheet as a “currency translation adjustment”.
A provision for contingencies for foreign exchange losses is
recorded only for the part of related flows that does not have
hedging.
Foreign exchange realized gains and losses, as well as provision for
unrealized losses, are booked in operating result if related to
operating flows/receivables/payables, and in financial result if
related to financial flows/receivables/payables.
NOTE B.10. FOREIGN EXCHANGE INSTRUMENTS
ESI Group uses financial instruments to manage its exposure to
exchange rate fluctuations. The Group’s policy is to trade in the
financial markets only to hedge its business-related obligations and
not for speculative purposes.
Gains or losses stemming from the financial instruments used as
part of hedging operations are assessed and recorded in line with
the income and expenses recorded on underlined transactions. At
maturity date, gains and losses from financial instruments are
booked in operating result when they are related to operating
receivables or debts and in financial result when they are related to
financial receivables or debts. Signed financial instruments are
presented as Off-balance-sheet commitments in the notes to the
financial statements in the period between subscription and
maturity.
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2
3
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5
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NOTE B.11. REGULATED PROVISIONS
Regulated provisions consist of accelerated capital allowances of
two types:
■Differences between tax-related amortization and amortization
for depreciation;
■Amortization of equity investments acquisition costs.
These regulated provisions are recorded in the income statement
as exceptional allowances and reversals.
NOTE B.12. PROVISIONS FOR CONTINGENCIES AND CHARGES
Provisions for contingency and charges are calculated on the basis
of the assessment of related risks at the closing date.
/ Provision for retirement and post-
employment benefits
Retirement commitments are valued and recognized using the
projected unit credit method. This actuarial method stipulates that
each period of service entitles the employee to one unit of benefit
rights and evaluates each of these units separately to arrive at a
final commitment.
These calculations use assumptions in terms of mortality, staff
turnover, discount rate, inflation rate and future salary increases.
Differences observed between the valuation of obligations and
forecasts of such obligations (on the basis of new projections or
assumptions) are known as actuarial gains and losses.
The expense for the period is fully recognized:
■In operating result for the amount pertaining to cost of services
and changes in actuarial gains and losses (excluding change in
discount rate);
■In financial result for the amount pertaining to interest on
discounting to present value and actuarial differences related to
variations in discount rate.
The provision at year-end represents the actuarial commitment.
The Company has no hedging asset.
NOTE B.13. REVENUE RECOGNITION
Licensing revenue is generated from royalties paid under licensing
agreements granted to end customers and related maintenance
services. Maintenance services include updates and technical
support.
Revenue is split between three types of contracts:
■Lease of annual renewable licenses that include the right to use
the software plus maintenance services for one year;
■Lease of “paid up licenses” conferring to end clients the right to
use the software for unlimited duration, with one year of
maintenance services – with the possibility of renewal through a
maintenance contract;
■Maintenance services alone – this contract completes “paid up
licenses” contracts.
Licensing revenue is generated from royalties paid under licensing
agreements granted to end customers and related maintenance
services.
This revenue is recognized when the following four criteria are met:
■The Group can demonstrate the existence of an agreement with
the client;
■The software has been delivered;
■The amount of the user license for the software is determined or
determinable;
■The recovery is likely.
Since the contracts do not distinguish between the license and
maintenance portions, the entire contractual amount is recognized
as soon as the software is delivered, whereas the maintenance
services, which are considered incidental, will be performed over a
period of one year.
Revenues from services consist mainly of consulting and training
fees. They are recognized according to the percentage of
completion method with regard to projects, such as the margin.
Costs are recorded as soon as they are incurred. A provision for
losses on completion is recorded if necessary.
Intragroup revenue mainly comprises royalty income received from
the
Group’s
distribution
subsidiaries
and
income
from
subcontracted consulting services, re-invoicing of personnel
expenses and invoicing of management fees.
/ Co-financed projects
As of fiscal year 2022, income from Co-funded Projects (“special
projects”) is recognized in the income statement under other
income from operations and no longer as revenue. In 2021, Co-
Financed Projects represented revenues of €1.9 million.
NOTE B.14. TAX CONSOLIDATION
On February 1, 2008, ESI Group has formed a tax consolidation
group with its French subsidiary, Engineering System International.
As part of the tax consolidation agreement, it was agreed that the
tax cost of Engineering System International integrated for tax
purposes would be equal to that which would have applied to it if
the subsidiary was not a member of the tax Group.
Tax integration has no impact on income tax cost recorded in the
Company income statement.
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NOTE C.
Asset details
NOTE C.1.
INTANGIBLE ASSETS
(In € thousands)
December 31, 2021
Increase
Decrease
December 31,
2022
Development costs
44,517
27,633
(31,724)
40,426
Patents, licenses, brands
24,447
150
(6,414)
18,183
Goodwill
657
657
Intangible assets in progress, development costs
15,185
11,091
(13,351)
12,925
Other intangible assets in progress
90
303
(150)
243
Total gross value
84,895
39,176
(51,639)
72,434
Development costs
(24,927)
(25,615)
30,554
(19,988)
Patents, licenses, brands
(13,096)
(1,472)
882
(13,686)
Goodwill
—
(82)
(82)
Total amortization, provisions
(38,024)
(27,169)
31,436
(33,756)
Development costs
19,589
2,018
(1,169)
20,437
Patents, licenses, brands
11,350
(1,322)
(5,532)
4,496
Goodwill
657
(82)
—
575
Intangible assets in progress, development costs
15,185
11,091
(13,351)
12,925
Other intangible assets in progress
90
303
(150)
243
TOTAL NET VALUE
46,871
12,007
(20,202)
38,678
As part of the “OneESI 2024 – Focus to Grow” plan, the Group has
announced the redeployment of a significant portion of its R&D
investments to growth opportunities. This has resulted in the
following identified intangible assets being disposed:
■Decrease in patents & licenses (€6,271 thousand) and
capitalized R&D intangible assets in progress (€2,803 thousand
and €150 thousand respectively) corresponding to the disposal
of the CFD Code (fluid simulation software) in gross value (or
€7,234 thousand as net book value);
■Decrease in brands (€45 thousand and patents & licenses
(€22 thousand fully amortized) related to the sale of SCILAB;
■Impairment of R&D work in progress for €778 thousand (gross
value not amortized);
■Scrapping of the OPTOPO software for €76 thousand as a gross
value (fully amortized) following the termination of the software
operating contract.
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2
3
4
5
6
7
8
9
NOTE C.2.
PROPERTY, PLANT AND EQUIPMENT
(In € thousands)
December 31,
2021
Increase
Decrease
Reclassification
December 31,
2022
Fixtures and fittings
2,049
7
(144)
1,912
Office furnishings and equipment
7,582
921
8,503
Other tangible non-current assets
27
27
Total gross value
9,658
928
(144)
10,442
Fixtures and fittings
(1,094)
(157)
135
27
(1,089)
Office furnishings and equipment
(6,647)
(489)
(27)
(7,164)
Other tangible non-current assets
(27)
(27)
Total amortization, provisions
(7,767)
(646)
135
—
(8,280)
Fixtures and fittings
955
(150)
(9)
823
Office furnishings and equipment
935
432
—
1,338
Other tangible non-current assets
—
—
—
—
TOTAL NET VALUE
1,889
282
(9)
—
2,161
NOTE C.3.
FINANCIAL ASSET
(In € thousands)
December 31,
2021
Increase
Decrease
December 31,
2022
Equity investments
52,351
350
(1,915)
50,786
Receivables related to equity investments
10,084
(5,095)
4,989
Other financial assets
(a)
1,526
313
(505)
1,334
Total gross value
63,961
663
(7,515)
57,109
Provisions for impairment of equity investments
(20,065)
(259)
12,229
(8,095)
Provisions for receivables related to equity investments
—
(1,520)
(1,520)
Provisions for depreciation of other financial assets
—
—
Total amortization, provisions
(20,065)
(1,779)
12,229
(9,615)
Equity investments
32,286
91
10,314
42,691
Receivables related to equity investments
10,084
(1,520)
(5,095)
3,469
Other investments
1,526
313
(505)
1,334
TOTAL NET VALUE
43,896
n.s.
n.s.
47,494
(a)
This line primarily includes deposits and guarantees on rental properties and factoring guarantee.
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/ Movements in equity investments (gross value)
(In € thousands)
December 31,
2021
Increase
Decrease
Other
movements
December 31,
2022
Engineering System International
458
458
ESI Japan, Ltd.
171
171
ESI North America, Inc.
3,726
834
4,560
ESI UK Ltd.
164
164
Calcom ESI SA
2,678
2,678
Hankook ESI Co., Ltd.
970
970
ESI Group Hispania s.l.
100
100
Mecas ESI s.r.o.
912
350
1,262
ESI US Holdings, Inc.
834
(834)
—
Frais Zhong Guo ESI Co., Ltd.
2
(2)
—
ESI Software (India) Private Ltd.
2
2
ESI US R&D, Inc.
4,128
4,128
Hong Kong ESI Co., Ltd.
119
(119)
—
Frais Hong Kong ESI Co., Ltd.
2
(2)
—
ESI-ATE Holdings Ltd.
1,737
(1,737)
—
Frais ESI-ATE Holdings Ltd.
56
(56)
—
ESI Italia s.r.l.
1,050
1,050
ESI South America Comércio e Serviços
de Informática Ltda
56
56
ESI Services Tunisie SARL
304
304
ESI Group Beijing Co., Ltd.
543
543
ESI Germany GmbH
10,708
18,710
29,418
ESI ITI GmbH
18,710
(18,710)
—
ESI Nordics AB
446
446
Open CFD Ltd.
2,351
2,351
ESI Services Vietnam Co., Ltd.
124
124
AECC-ESI (Beijing) Technology Co., Ltd.
448
448
Cademce SAS
100
100
Shares acquisition costs
1,453
1,453
TOTAL
52,351
350
(1,915)
—
50,786
Movements of the year are related to:
■In January 2022, ESI Holding (USA) has been absorbed by ESI
North America (USA), through a simplified merger. The value of
the ESI US Holdings, Inc shares was therefore added to the
historical value of the ESI North America, Inc shares for €834
thousand;
■In July 2022, ESI ITI GmbH has been merged into ESI Software
Germany GmbH, through a simplified merger. This operation,
between two companies fully-owned by ESI Group was carried
out with retroactive effect from January 1, 2022. The value of the
ESI ITI GmbH shares was added to the historical value of the ESI
Software Germany GmbH (then renamed ESI Germany GmbH)
shares for €18,710 thousand;
■Purchase of remaining 5% minority share of ESI MECAS for €350
thousand in December 2022 (Czech Republic);
■During the fall 2022, closure of the dissolution of the two
companies headquartered in Hong Kong: ESI HKE and ESI ATE.
(€1,737 thousand for gross share value and €56 thousand as
share acquisition costs) and ESI Hong Kong (€119 thousand and
€4 thousand, respectively).
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/ Movements in the provision for equity investments
(In € thousands)
December 31,
2021
Increase
Decrease
Other
movements
December 31,
2022
ESI-ATE Holdings Limited
1,737
(1,737)
—
—
Hong Kong ESI CO., Limited
119
(119)
—
—
Open CFD Limited
2,235
116
2,351
ESI US R&D
3,479
3,479
Cademce
100
100
Calcom
2,022
2,022
ESI ITI GmbH
10,374
(10,374)
—
ESI Germany GmbH
(10,374)
10,374
—
ESI Vietnam
—
43
43
ESI Group Hispania s.l.
100
100
TOTAL
20,066
259
(12,229)
—
8,095
As of December 31, 2022, the net book value of investments in
Open CFD Limited, ESI Group Hispania s.l. and ESI Vietnam has
been aligned to the re-estimated value of each subsidiary
(Note B.4).
Due to the closing of the liquidation of the Hong Kong companies
ESI-ATE Holdings Limited and Hong Kong ESI CO.Limited, the equity
interests were impaired and the corresponding provisions were
reversed.
As at 31 December 2022, the value of the new entity resulting from
the absorption of ESI ITI GmbH by ESI Software Germany GmbH
(subsequently renamed ESI Germany GmbH) has been reassessed.
The value of the securities of this new global entity no longer
justifies the provision for equity investment that has therefore been
released.
/ Receivables related to equity investments
Gross value
(In € thousands)
December 31,
2021
December 31,
2022
Remuneration rate
Loan ESI North America, Inc. ($9.7 million)
8,564
3,469
6-month Libor $ +1% margin
Loan ESI Group Hispania SL
1,520
1,520
Participative loan capped at 5%
TOTAL
10,084
4,989
Movements during the year for ESI North America correspond to
the partial repayment (US$6 million) of the loan granted as well as
exchange rate revaluations. The balance of the loan stands at
3.7 million US dollars as of December 31, 2022.
The loan granted to ESI Group Hispania s.l. has been depreciated in
the 2022 financial statements.
Financial interests are recorded in financial result.
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NOTE C.4.
RECEIVABLES - PROVISIONS FOR DEPRECIATION OF RECEIVABLES
December 31, 2022
December 31,
2021
(In € thousands)
Gross value
Due in 1 year
or less
Due in between
1 and 5 years
Gross value
Loans granted to subsidiaries (C.3)
4,989
4,989
10,084
Treasury shares (C.3)
162
162
232
Deposits and guarantees (C.3)
1,172
1,172
1,295
Doubtful or disputed receivables
3,601
3,601
3,654
Trade receivables
10,774
10,774
13,063
Trade receivables with affiliate companies
43,060
43,060
38,919
Income tax receivables – advance payment
—
—
—
R&D tax credit receivable
(a)
2,739
2,739
3,579
Competitiveness and employment tax credit receivable
156
156
332
Other tax credits
482
482
Value added tax (VAT)
733
733
923
Co-financed projects
736
736
Trade payables debtors
358
358
414
Group and associates
2,338
2,338
687
Other receivables
3,619
244
3,375
913
Prepaid expenses (C.6)
3,045
3,045
2,094
TOTAL
77,963
68,265
9,698
76,189
(a)
The research tax credit receivable has been factored, the counterpart is recognized in research tax credit.
The item “Other receivables over one year” corresponds to the balance of the sale price of the fluid simulation software (“CFD”).
/ Details of provisions for depreciation of receivables
(In € thousands)
December 31,
2021
Increase
Reversal used
December 31,
2022
Provisions for doubtful receivables
3,828
465
740
3,552
Provisions for other receivables
—
898
898
TOTAL
3,828
1,362
740
4,450
NOTE C.5.
MARKETABLE SECURITIES
Marketable securities consist of treasury shares and cash investments.
/ Treasury shares
Treasury shares in the balance sheet are classified in Marketable securities for €5.687 million (historical book value) as of December 31, 2022.
Market valued amounted €26.354 million.
/ Change in the number of treasury shares – Marketable securities
December 31,
2021
Increase
Decrease
Other
movements *
December 31,
2022
TREASURY SHARES
340,907
30,000
14,389
588
357,106
*
Adjustment on inventory prior to 2017.
Under a liquidity contract, ESI Group also holds 2,195 treasury
shares recorded as financial assets, valued at €162 thousand.
/ Cash investments
Cash investments amounted €11,373 thousand as of December 31,
2022 (0 as of December 31, 2021) and are mainly invested in short-
term deposits, secured at maturity, in euros and US dollars. They
are held by Tier-one French banking institutions.
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2
3
4
5
6
7
8
9
NOTE C.6.
PREPAID EXPENSES AND EXPENSES CAPITALIZED, TO BE AMORTIZED
(In € thousands)
December 31, 2022
December 31, 2021
Prepaid rent
385
368
Maintenance prepaid expenses
1,794
1,355
Other prepaid expenses
865
371
Expenses related to syndicated loan and State guaranteed loans set up
(a)
250
350
TOTAL
3,295
2,444
(a)
Amortization over the duration of the loans.
NOTE C.7.
FOREIGN EXCHANGE UNREALIZED LOSSES
These gains and losses pertain to the following balance sheet items:
(In € thousands)
December 31, 2022
December 31, 2021
Trade receivables
523
4,707
Trade payables
1,310
1,308
Others
277
18
TOTAL
2,110
6,033
NOTE C.8.
ACCRUED INCOME
(In € thousands)
December 31, 2022
December 31, 2021
Receivables to be invoiced
992
7,553
Receivables to be invoiced from affiliate companies
6,474
6,455
Vendor credit notes to be issued
5
18
Group vendors credit notes to be issued
353
396
Miscellaneous income
—
—
TOTAL
7,824
14,422
NOTE D.
Liability details
NOTE D.1.
EQUITY
The main movements during the financial year are summarized in the table below:
(In € thousands)
December 31, 2021
Allocation of
2021 profit
2022 net result
Other
December 31,
2022
Capital
18,193
34
18,227
Share premium
26,985
333
27,318
ESI Software merger premium
9,677
9,677
Systus merger premium
2,854
2,854
Legal reserve
1,809
(4)
1,805
Retained earnings
(1,746)
(27,992)
4
(29,735)
Net result for the year
(27,992)
27,992
41,737
41,737
Regulated provisions
1,513
(59)
1,454
TOTAL
31,293
—
41,737
308
73,337
Movements presented in the “Other” column refer to:
■The capital increase resulting from the exercise of 11,475 stock
options subscription (issuance of new shares with a nominal
value of €3) for €34 thousand;
■The corresponding increase in the share premium for an
amount of €333 thousand;
■The reversal of exceptional amortization on acquisition costs for
-€59 thousand of which -€56 thousand for ESI ATE Holdings and
-€3 thousand for ESI Hongkong, following the dissolution of
those entities.
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NOTE D.2.
SHARE CAPITAL
Number of shares
At the end of the
financial year
Created during the
financial year
Repaid during the
financial year
Common shares (par value of €3)
6,075,616
11,475
—
O/w preferred shares (double voting rights)
1,973,843
—
The capital increase is attributable to the exercise of 11,475 stock-options.
NOTE D.3.
STOCK OPTIONS AND FREE SHARES PLANS
Stock options and free share grants have been authorized by various General Meetings and could potentially dilute ESI Group’s capital.
The tables below describe ongoing plans.
/ Stock options
Plan number (date
of General Meeting)
Date of Board of
Directors
Number of
attributable
options
granted
Number of
options
granted
O/w
performance
shares
Exercise
price
Number of
options
exercisable at
December 31,
2022
Limit year
for
exercising
options
Plan 10 (GM 2012)
12/19/2012
150,850
62,300 27,820.00
2021
Plan 10 bis (GM 2012)
02/07/2014
11,000
24,420.00
—
2022
Plan 10 ter (GM 2012)
03/26/2015
15,000
21,660.00
2025
Plan 10 quater (GM 2012)
07/22/2015
3,150
27,170.00
—
2025
Total GM 2012
180,000
180,000
62,300
—
Plan 17 (GM 2014)
07/22/2015
7,350
27,170.00
2023
Plan 17 bis (GM 2014)
03/11/2016
10,000
23,350.00
2026
Plan 17 ter (GM 2014)
05/05/2017
18,175
50,920.00
8,500
2025
Plan 17 quater (GM 2014)
05/05/2017
1,875
1,875 50,920.00
2025
Total GM 2014
180,000
37,400
1,875
8,500
Plan 19 (GM 2017)
07/18/2018
43,950
32,963 42,970.00
5,315
2026
Plan 19 bis (GM 2017)
02/01/2019
20,000
15,000 27,040.00
5,000
2027
Plan 19 ter (GM 2017)
12/18/2019
25,785
29,120.00
16,810
2027
Total GM 2017
180,000
89,735
47,963
27,125
Plan 21 (GM 2021)
09/10/2021
24,000
14,400
60.47
—
2029
Plan 21 bis (GM 2022)
28/06/2022
36,000
21,600
64.78
2030
Plan 21 ter (GM 2022)
28/06/2022
9,150
4,575
64.78
2030
Total GM 2020
300,000
69,150
40,575
—
TOTAL STOCK-OPTIONS
840,000
376,285
152,713
35,625
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2
3
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7
8
9
/ Free shares
Plan number (date
of General Meeting)
Date of Board of
Directors
Authorized
number of
shares
Number
of shares
granted
O/w
performance
shares
Number of shares
in progress at
December 31,
2022
End of vesting
period
Plan No. 9 (GM 2018)
07/18/2018
60,000
10,617
7,964
—
2021
Plan No. 9 bis (GM 2018)
07/18/2018
2,441
2020
Plan No. 9 ter (GM 2018)
07/18/2018
15,500
—
2022
Plan No. 9 quater (GM 2018)
07/18/2018
16,250
1,166
2023
Plan No. 9 quinquies (GM 2018)
12/18/2019
6,337
—
2022
Plan No. 9 sexies (GM 2018)
12/18/2019
2,521
—
2021
Plan No. 9 septies (GM 2018)
03/19/2020
5,000
5,000
2023
Plan No. 10 (GM 2020)
06/25/2020
60,000
3,000
2023
Plan No. 10 bis (GM 2020)
06/10/2021
7,000
2,000
2023
Plan No. 10 ter (GM 2020)
10/04/2021
8,122
4,061
8,122
2025
Plan No. 10 quater (GM 2020)
10/04/2021
3,255
2,820
2024
Plan No. 10 quinquies (GM 2020)
10/04/2021
15,250
15,250
2025
Plan No. 10 sexies (GM 2020)
10/04/2021
716
555
2025
Plan No. 10 septies (GM 2020)
10/04/2021
8,331
7,215
2024
Plan No. 10 octies (GM 2020)
11/19/2021
4,000
2,000
—
2025
Plan No. 10 novies (GM 2020)
11/19/2021
10,000
—
2025
Plan No. 11 (GM 2022)
06/28/2022
120,000
10,035
5017
10,035
2024
Plan No. 11 bis (GM 2022)
06/28/2022
25,349
25,349
2024
Plan No. 11 ter (GM 2022)
06/28/2022
660
531
2024
Plan No. 11 quater (GM 2022)
06/28/2022
7,620
7,620
2024
Plan No. 11 quinquies (GM 2022)
06/28/2022
4,800
2400
4,800
2024
Plan No. 11 sexies (GM 2022)
06/28/2022
11,874
11,874
2024
Plan No. 11 septies (GM 2022)
06/28/2022
5,233
5,233
2024
Plan No. 11 octies (GM 2022)
06/28/2022
13,750
13,750
2026
Plan No. 11 nonies (GM 2022)
11/17/2022
2,500
2,500
2026
TOTAL FREE SHARES
240,000 200,161
21,442
123,820
All stock options and free shares plans include a continued employment requirement.
NOTE D.4.
CONDITIONAL ADVANCES
(In € thousands)
December 31,
2022
Up to 1 year
1 to 5 years
More than 5
years
December 31,
2021
Ademe advance
750
18
—
732
768
Bpifrance advance
1,137
496
642
—
1,004
TOTAL
1,887
514
642
732
1,772
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NOTE D.5.
PROVISIONS FOR CONTINGENCIES AND CHARGES
(In € thousands)
December 31,
2021
Increase
Reversal
December 31,
2022
Foreign exchange unrealized losses (note C.7)
6,033
2,110
(6,033)
2,110
Provisions for contingencies and charges
6,087
830
(4,880)
2,036
Provision for retirement obligations
4,314
408
(1,704)
3,018
Others Provisions
78
78
TOTAL
16,434
3,426
(12,617)
7,243
Provisions for contingencies and charges cover risks and expenses
of a social nature, including €1,121 thousand related to the “OneESI
2024 – Focus to Grow” transformation plan launched in 2021. The
reversal of the provision recognized during the financial year 2022
covers the charges recorded during the period.
Provision allowance for retirement obligations breaks down as
follows:
■€365 thousand provision of operating allowance, as well as a
provision reversal of -€730 thousand related to the change in
actuarial assumptions (with the exception of the change in the
discount rate, of a financial nature) and for indemnities paid by
the employer;
■€43 thousand of financial allowance corresponding to interest
expenses, as well as a provision reversal of -€974 thousand
related to the increase in discount rate;
■Other provisions cover the financial risk linked to a subsidiary for
€78 thousand.
/ Actuarial assumptions for retirement obligations
December 31, 2022
December 31, 2021
Discount rates
3.75%
0.90%
Rate of salary increase
3.00%
2.50%
The discount rate corresponds to AA-rate corporate bond rates in the Eurozone, adjusted according to the duration of the Group’s
commitments. Turnover rates are calculated per age group according to the past experience of the Company.
NOTE D.6.
STATEMENT OF LIABILITIES
(In € thousands)
December 31,
2022
Up to
1 year
1 to
5 years
More than
5 years
December 31,
2021
Banks borrowings (D.7)
32,628
10,907
21,721
38,825
Miscellaneous financial debt (D.8)
—
—
2,500
Trade payables
4,976
4,976
3,769
Group trade payables
38,964
38,964
45,006
Personnel and related
receivables (D.9)
4,105
4,105
3,871
Payroll taxes (D.9)
3,778
3,778
3,559
Value-added tax (D.9)
63
63
373
Other tax expense (D.9)
3,497
3,497
700
Liabilities to fixed asset suppliers
350
350
Other operating payables –
Group and associates (D.10)
7,289
7,289
11,481
Other operating payables –
out of Group (D.10)
3,430
3,430
1,444
Deferred income
432
432
3,612
TOTAL
99,512
77,791
21,721
—
115,140
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2
3
4
5
6
7
8
9
NOTE D.7.
BANK LOANS
At December 31, 2022, bank loans stood at €32,628 thousand and
break down as follows:
■€14,918 thousand related to the part reimbursable over several
years, of which €5 million to be repaid in 2023;
■€13,641 thousand related to two State guaranteed loans signed
in 2020;
■€2,400 thousand related to a loan with BPI France, including
€800 thousand to be repaid in 2023;
■€1,575 thousand corresponding to a loan to finance the cost of
moving Rungis office – fully due October 2023;
■The balance corresponds to accrued interest on the various
loans.
ESI Group’s main source of financing is the syndicated loan, which
consists of a part reimbursable over several years of €15 million at
end 2022, and of a €10 million revolving credit, not used at end
2022. Yearly instalments of the long-term part are paid on April 30
each year, until April 30, 2025. The syndicated loan remuneration is
based on the Euribor rate and a margin of 2%, 2.25% or 2.5%
depending on the level of the Net financial debt/EBITDA ratio
related to previous year financial statements. The margin applied,
which stood at 2.25% at the start of the year, was reduced to 2.00%
as of July 29, 2022.
ESI Group signed in 2020 two State guaranteed loans: in August a
loan of €1.75 million with BPI France, and in October a loan of
€12 million with the bank pool of the syndicated loan. ESI Group has
decided to reimburse the loans in five years per quarter. Different
interests rates will be applied by each bank on their respective
financing share.
Off-balance-sheet commitments associated with this syndicated
loan are presented in note F.4.
NOTE D.8.
MISCELLLANEOUS FINANCIAL DEBT
(In € thousands)
December 31,
2022
Up to 1 year
1 to 5 years
More than 5 years
December 31, 2021
Promissory note
—
—
2,500
TOTAL
—
—
2,500
As of December 31, 2021, ESI Group had recourse to a promissory note at the end of the year for an amount of €2.5 million. It was fully repaid
on February 28, 2022.
NOTE D.9.
TAX PAYABLES AND EMPLOYEE-RELATED LIABILITIES
(In € thousands)
December 31, 2022
December 31, 2021
Provision for paid leave, including payroll taxes
1,953
2,330
Provision for bonuses to be paid to employees, including payroll taxes
2,489
2,922
Other payroll taxes
3,440
2,177
VAT collected
63
373
Other taxes
3,497
700
TOTAL
11,443
8,502
The increase in tax and social security liabilities is explained by the recording of a provision for employee profit-sharing for the 2022 fiscal year
(€838 thousand including the social charges) and the corporate income tax of the financial year (€3,275 thousand). It is reminded that the
2021 financial year result was a loss.
NOTE D.10. OTHER OPERATING PAYABLES
(In € thousands)
December 31, 2021
Increase
Decrease
December 31, 2022
Creditor trade receivables
72
160
(60)
171
Subsidiaries current account
11,481
13,472
(17,664)
7,289
Advances on co-financed projects
—
—
—
Other liabilities
1,444
2,182
(196)
3,430
TOTAL
12,996
15,813
(17,920)
10,890
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NOTE D.11. FOREIGN EXCHANGE UNREALIZED PROFIT
These gains and losses pertain to the following balance sheet items:
(In € thousands)
December 31, 2022
December 31, 2021
Trade receivables
1,277
6,066
Trade payables
436
371
Intercompany receivables
202
660
Other receivables and debts
92
254
TOTAL
2,007
7,351
NOTE D.12. ACCRUED EXPENSES
(In € thousands)
December 31, 2022
December 31, 2021
Borrowings and financial debts
95
300
Trade payables
3,625
3,262
Provision for paid leave, including payroll taxes
1,953
2,330
Provision for bonuses to be paid to employees, including payroll taxes
2,489
2,921
Other tax expenses
3,275
366
Other social expenses
838
Other liabilities (advances on co-financed projects)
513
205
TOTAL
12,788
9,384
NOTE E.
Details on income statement
NOTE E.1.
REVENUE
/ Breakdown by type
(In € thousands)
December 31, 2022
December 31, 2021
Software licenses
11,593
12,029
Sub-contracting, consulting and other income
982
941
Royalties received from Group distribution subsidiaries
66,340
64,223
Sub-contracting, consulting and other income – Group
324
1,123
Income from related activities – Group
3,441
2,497
Management fees Group
5,815
5,008
TOTAL
88,496
85,821
/ Breakdown by geographic area
(In € thousands)
December 31, 2022
December 31, 2021
France
9,643
9,479
Europe (except France)
29,004
29,385
Americas
14,892
13,717
Asia
34,957
33,240
TOTAL
88,496
85,821
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2
3
4
5
6
7
8
9
NOTE E.2.
OTHER INCOME FROM OPERATIONS
(In € thousands)
December 31, 2022
December 31, 2021
Production held as inventory
Capitalized production
26,729
30,151
Reversal on depreciation and amortization
1,470
3,176
Reversal on foreign exchange provision on trade receivables and payables
—
—
Foreign exchange gains on trade receivables and payables
3,808
2,301
Other income
1,112
1,409
TOTAL OTHER INCOME
33,119
37,036
Capitalized production (€26.7 million in 2022) corresponds to the
activation of the costs of developing new features or new versions
of ESI’s software.
As of the 2022 financial year, income from co-financed projects
(“special projects”) is recognized under other income from
operations and no longer as a revenue. In 2021, the co-financed
projects represented a turnover of €1.9 million.
During the production of a co-financed project, the income
recognized as transfer of expenses is determined on the basis of
the progress rate of the project, in proportion to the percentage
financed.
NOTE E.3.
OTHER PURCHASES AND EXTERNAL EXPENSES
(In € thousands)
December 31, 2022
December 31, 2021
Engineering studies and other services
6,211
7,289
Engineering studies and other services – Group
12,912
17,088
Research and development costs – Group
21,358
19,861
Materials and supplies
325
288
Leases and rental expenses
5,710
5,083
Maintenance and repairs
1,078
1,384
Insurance
209
226
Payments to intermediaries and fees
3,974
2,308
Royalties on third-party products and sales commissions
(1,202)
1,715
Advertising, external relations
392
234
Travel expenses
510
135
Postage, telecommunications expenses
207
273
Other
904
1,004
TOTAL
52,589
56,888
NOTE E.4.
INCOME TAX EXPENSE
(In € thousands)
December 31, 2022
December 31, 2021
Corporate Value-Added Contribution (CVAE)
352
929
Corporate Real Estate Contribution (CFE)
125
141
Apprenticeship, continuing education and construction-related taxes
377
457
Other taxes
68
(240)
TOTAL
922
1,287
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NOTE E.5.
OPERATING ALLOWANCES
(In € thousands)
December 31, 2022
December 31, 2021
Amortization allowance for development costs
25,615
29,308
Amortization allowance for other intangible assets
1,554
1,635
Amortization allowance for tangible assets
646
743
Amortization allowance for capitalized expenses to be amortized
100
102
Provision for impairment of trade receivables
465
977
Provision for retirement obligations
365
393
Provision for contingencies and charges
—
511
TOTAL
28,746
33,669
NOTE E.6.
OTHER OPERATING EXPENSES
(In € thousands)
December 31, 2022
December 31, 2021
Royalties
—
6
Directors’ fees
450
343
Foreign exchange losses on trade receivables and payables
1,272
1,897
Loss on trades receivables
429
—
Miscellaneous expenses
107
16
TOTAL
2,257
2,262
NOTE E.7.
FINANCIAL RESULT
(In € thousands)
December 31, 2022
December 31, 2021
Foreign exchange gain/(loss) realized
1,303
399
Interest on borrowings
(500)
(917)
Interest on subsidiaries current account
(25)
(42)
Provision for retirement obligations
931
(15)
Provision for impairment equity investments and related receivables
(1,857)
(5,405)
Reversal provision for investments and related receivables
(a)
10,374
784
Loss on simplified merger
442
(239)
Provision for foreign exchange loss
4,880
2,378
Other financial income/(expenses)
933
(127)
TOTAL
16,481
(3,184)
(a) The reversal of provision for investment is related to ESI ITI GmbH merged into ESI Germany GmbH. The value of the securities of this new global entity no longer justifies
the provision for equity investment that has therefore been released.
NOTE E.8.
EXCEPTIONAL RESULT
(In € thousands)
December 31, 2022
December 31, 2021
Profit or loss on movements of treasury shares
(147)
(149)
Accelerated capital allowances
59
(7)
Loss of expired foreign tax credits
—
(879)
Staff cots related to restructuring plan OneESI
(5,310)
(874)
Chan ge in provision for Restructuring plan OneESI
4,050
(5,130)
Profit or loss on movements of other
(553)
Gain on intangible asset disposal CFD/SCILAB
17,085
Fixed asset restructuring – write-off
(779)
(21,370)
Loss on tangible fixed assets
(9)
(184)
Loss on Financial fixed assets
(1,915)
(2,387)
IP litigation compensation
883
Miscellaneous
(34)
(101)
TOTAL
12,447
(30,198)
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2
3
4
5
6
7
8
9
NOTE F.
Other information
NOTE F.1.
AVERAGE HEADCOUNT
Employees (In full-time equivalent)
December 31, 2022
December 31, 2021
Executives
212
222
Office personnel
5
12
TOTAL
217
234
Average headcount in France and in branches outside France.
NOTE F.2.
COMPENSATION PAID TO EXECUTIVE CORPORATE OFFICERS
Total compensation paid to ESI Group’s executive corporate officers are as follows (three executive corporate officers in 2021, one executive
corporate officer in 2022):
(In € thousands)
December 31, 2022
December 31, 2021
Wages
91
359
Benefits in kind
13
Directors’ fees
—
18
Compensation paid by controlled companies
285
435
Fringe benefits paid by controlled companies
—
—
TOTAL
376
825
NOTE F.3.
BRANCHES
There is one branches integrated within ESI Group’s financial statements.
Name
Address
Country
ESI Group Netherlands – Branch Office
Vlieland 11, 2716AA Zoetermeer Zuid-Holland
The Netherlands
NOTE F.4.
OFF-BALANCE SHEET COMMITMENTS
/ Future lease obligations
(In € thousands)
Less than 1 year
Between 1 and 5 years
Real estate rentals
1,216
4,511
Movable property rentals
64
116
TOTAL
1,280
4,627
Future lease commitments correspond to the outstanding amounts
due on the Group’s main lease and rental contracts until the
contractual next maturity date.
/ Financial instruments
ESI Group subscribed to financial instruments in order to mitigate
its exposure to changes in foreign exchange rates and interest
rates.
■Interest rate instruments:
Historically, the interest rate swaps set up by ESI Group have
hedged the variable interest rate of the syndicated loan. The
syndicated credit agreement signed in December 2018 requires
the set-up of variable rate hedging up to 50% of the outstanding
loan amount. Two swaps were signed during the first half of
2022 to meet this requirement, with a nominal value of
€3.5 million each, where ESI Group receives a three months
Euribor (with a 0% floor) and pays a fixed rate of 1.249% and
1.360% respectively. At the end of 2022, the underlying assets
covered by each of these contracts amounted to €3.5 million.
Results at maturity for interest rate instruments are recognized
in financial result.
■Foreign exchange instruments:
In order to hedge foreign currency cash flows between the
Group’s parent company and its subsidiaries, ESI Group may at
any time acquire currency options and any other form of
currency contracts. Foreign exchange instruments in place as of
December 31, 2022 concerned Japanese yen (FX forward with a
nominal of JPY 1.7 billion), Korean won (non-deliverable FX
forward with a nominal amount of KRW 1.8 billion) and Indian
rupee (non-deliverable FX forward with a nominal amount of INR
500 million). These impact of those financial instruments, with a
maximal maturity of 12 months are accounted in foreign
exchange gain or loss.
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/ Guarantees & Pledges
As part of the credit agreement dated December 20, 2018, ESI
Group granted a pledge of 99.98% of the shares of the French
subsidiary Engineering System International and 100% of the shares
of the German subsidiaries ESI Software Germany GmbH and ESI ITI
GmbH.
In 2022, ESI Group obtained the agreement from the lenders to
proceed with the merger of the German legal entities, in order to
simplify its legal organization. The collateral granted to lenders now
covers only 100% of the shares of the acquiring company, ESI
Software Germany (now renamed ESI Germany GmbH). The pledge
of 99.98% of the shares of the French subsidiary Engineering System
International is unchanged.
ESI Group had security deposit with Crédit du Nord for an amount
of €82 thousand, established in November 2012 and expiring
November 28, 2021 plus six months. This guarantee has expired
during the fiscal year 2022 and released has been obtained.
/ Other financial commitments
As long as it owes an obligation under the agreement or the
security documents, the borrower undertakes, under prepayment
constraint, to comply with the ratio of consolidated net financial
debt divided by consolidated EBITDA, the thresholds to be
respected over the term of the syndicated loan agreement are
gradually decreasing. As at December 31, 2022, the threshold to be
respected is 3%. Based on the annual consolidated financial
statements, the Group was in compliance with this ratio.
Finally, as part of the sale, on July 13, 2022, of the non-strategic fluid
simulation software ("CFD") US$3.6 million remains to be received
within a period of 18 months from that closing date, subject to the
absence of implementation by the purchaser of the contractual
guarantees.
NOTE F.5.
RECONCILIATION OF PROFIT/(LOSS) AND TAX INCOME/(CHARGE)
(In € thousands)
Profit (loss)
before tax
Reconciliation
of income/loss
Taxable
income
Tax (expense)/
income*
Profit (loss)
after tax
Current income (loss)
30,681
(16,645)
14,036
(1,736)
12,300
Non current income
11,749
698
12,447
(1,539)
10,908
TAX INCOME (LOSS)
42,430
(15,947)
26,483
(3,275)
23,208
*
Excluding R&D tax credit.
NOTE F.6.
INCREASES AND DECREASES IN FUTURE TAX LIABILITIES
(In € thousands)
December 31, 2022
Special social security contribution (contribution sociale de solidarité)
—
Retirement allowance
3,017
Translation differences
2,007
Interest
219
TOTAL TEMPORARY DIFFERENCES
5,243
NET DECREASE IN FUTURE INCOME TAX LIABILITIES (TAX RATE OF 26.5%)
1,311
Increases and decreases in future income tax liabilities were
measured based on the statutory tax rate for the French income
tax. They result from time difference between tax and accounting
treatment of income and expenses.
At end 2022, the Company tax losses carried-forward amounts to
€29 million.
NOTE F.7.
ESI GROUP, CONSOLIDATING COMPANY
ESI Group, headquartered 3 bis, rue Saarinen, 94150 Rungis, France, is the consolidating holding company of the Group of the same name.
FINANCIAL STATEMENTS
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1
2
3
4
5
6
7
8
9
NOTE F.8.
TABLE OF CONTROLLED ENTITIES AND AFFILIATES (AT DECEMBER 31, 2022)
(In € thousands)
Head-
quarters
Capital
(converted
at the
closing
rate)
Shareholders’
equity other
than capital
and net profit
for the year
(converted at
the closing rate)
% of
capital
owned
(in %)
Carrying
number of
shares held
Outstanding
loans and
advances
granted by
the
Company or
by the
subsidiary
Total
guarantees
granted by
the
Company
Revenues,
after tax,
for the last
financial
year
(converted at
the average
exchange
rate)
Profit or
loss for
the last
financial
year
(covered at
the average
exchange
rate)
Dividends
received by
the
Company
during the
financial
year
Gross
Net
A. Detailed information on each security with gross value exceeding 10% of the Company’s capital
1. Over 50%-owned subsidiaries
Engineering System
International SAS
France
1,020
2,044
100
458
458
—
18,598
660
ESI Japan, Ltd.
Japan
99
991
100
171
171
(2,155)
29,984
387
Hankook ESI Co., Ltd.
South
Korea
998
(3,364)
100
970
970
5,797
(270)
ESI North America, Inc.
USA
684
(5,793)
100
4,560
4,560
3,469
22,978
543
ESI Group Hispania s.l.
Spain
100
(1,924)
100
100
—
2,020
5,661
(36)
Mecas ESI s.r.o.
Czech
Republic
16
1,215
100
1,262
1,262
(680)
7,577
(619)
ESI UK Ltd.
United
Kingdom
120
1,855
100
164
164
(305)
5,679
218
ESI US R&D, Inc.
USA
194
4,083
49
4,128
649
40
7,191
228
Calcom ESI SA
Switzerlan
d
83
1,071
99
2,678
656
593
610
286
ESI Software (India)
Private Ltd.
India
2
8,532
100
2
2
10,689
1,283
ESI Italia s.r.l.
Italy
500
(51)
100
1,050
1,050
79
5,663
(257)
ESI South America
Comércio e Serviços de
Informática, Ltda
Brazil
9
211
100
56
56
(5)
888
17
ESI Services Tunisie
SARL
Tunisia
107
1,268
100
303
303
334
10
ESI Group Beijing Co.,
Ltd.
China
602
(2,566)
100
543
543
5,355
(1,143)
ESI Germany GmbH
Germany
517
8,381
100 29,418 29,418
(3,867)
32,951
(1,189)
ESI Nordics AB
Sweden
11
442
100
446
446
7
1,753
(38)
Open CFD Ltd.
United
Kingdom
—
(1,282)
100
2,351
—
898
453
(521)
ESI Services Vietnam
Co., Ltd.
Vietnam
73
128
100
124
81
167
(32)
2. 10-50% owned subsidiaries
JV AECC-ESI
China
1 275
1,713
35
448
448
—
Data as of December 31, 2022 presented in this table are non-audited data.
NOTE F.9.
SUBSEQUENT EVENTS
On January 6, 2023, ESI Vietnam went into liquidation.
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6.2.4. Statutory Auditors’ report on the financial statements
This is a translation into English of the statutory auditors’ report on the financial statements of the Company issued in French and it is provided solely
for the convenience of Englishspeaking users. This statutory auditors’ report includes information required by European regulations and French law,
such as information about the appointment of the statutory auditors or verification of the management report and other documents provided to the
shareholders. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards
applicable in France.
Year ended 31 December 2022
To the Annual General Meeting of ESI Group,
Opinion
In compliance with the engagement entrusted to us by your Annual General Meeting, we have audited the accompanying financial statements of
ESI Group for the year ended December 31, 2022.
In our opinion, the financial statements give a true and fair view of the assets and liabilities and of the financial position of the Company as at
December 31, 2022 and of the results of its operations for the year then ended in accordance with French accounting principles.
The audit opinion expressed above is consistent with our report to the Audit Committee.
Basis for Opinion
/ Audit Framework
We conducted our audit in accordance with professional standards applicable in France. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Statutory Auditors’ Responsibilities for the Audit of the Financial
Statements section of our report.
/ Independence
We conducted our audit engagement in compliance with the independence requirements of the French Commercial Code (Code de commerce)
and the French Code of Ethics for Statutory Auditors (Code de déontologie de la profession de commissaire aux comptes) for the period from January
1, 2022 to the date of our report, and specifically we did not provide any prohibited non-audit services referred to in Article 5(1) of Regulation (EU)
No. 537/2014.
Justification of Assessments – Key Audit Matters
In accordance with the requirements of Articles L. 823-9 and R. 823-7 of the French Commercial Code (Code de commerce) relating to the
justification of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our professional
judgment, were of most significance in our audit of the financial statements of the current period, as well as how we addressed those risks.
These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do
not provide a separate opinion on specific items of the financial statements.
/ Valuation of development costs
Risk identified
Our response
In the balance sheet, intangible assets include capitalized development
costs for net carrying amounts of K€ 33,362 as at December 31, 2022.
The development costs correspond mainly to direct labor and
subcontracting costs relating to the development of new offers or
major improvements to existing software solutions.
As indicated in Note B.2. to the financial statements, the capitalization
of these development costs is subject to compliance with the criteria
set out in the rules on fixed assets according to French accounting
standards. The amortization times, which are between 12 and 36
months, are estimated for each project depending on the period
during which your Company expects the software concerned to
generate revenue. Projects corresponding to the development of new
software versions, which are delivered annually, are amortized over 12
months. Projects corresponding to the development of major new
features are amortized over 24 or 36 months depending on the level
of innovation associated.
Impairment for the net carrying amount of the capitalized
development costs is recognized when, at year-end, the probable
future economic benefits are no longer sufficient to cover the residual
value of the asset.
The assessment of compliance with the criteria for capitalization of
development costs, the determination of the amortization period, and
the impairment of capitalized projects no longer generating future
economic benefits, are based on Management’s judgment and the
reliability of the procedures applied for the identification and allocation
of the costs between the different projects.
On this basis, we considered the capitalization of development costs to
be a key audit matter.
For a sample of projects developed during financial year 2022, we
assessed the compliance of the criteria for capitalization on the
balance sheet with the accounting standard in force:
■
We reconciled the accounting data with the management data
giving detailed information on the capitalized projects, in order to
assess the reliability of the information reported;
■
By sampling, we checked the individual hourly rates used by your
Company to value the hours reported in the capitalized project
calculation file and reconciled these hours with the timesheets
entered by the engineers;
■
We verified the correct calculation of the amortization expense on
the basis of the period established for each project by your
Group’s Management and we assessed the reliability the release
date of the projects selected as samples;
■
We assessed the overall consistency of the amortization periods
estimated by your Company, particularly in relation to market
references;
■
We verified the amount of the mark-up applied to R&D expenses
at within your Company when the developments are carried out by
subsidiaries, according to contractual rates defined in intragroup
agreements;
■
In addition, we assessed that there were no indication of
impairment of the projects capitalized at year-end.
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2
3
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9
/ Valuation of equity investments
Risk identified
Our response
Equity investments were recorded in the balance sheet for the year
ended December 31, 2022 for a net carrying amount of K€ 42,691.
At acquisition date, these equity investments are valued at
acquisition cost, which includes the purchase price and the costs
directly attributable thereto. At each year-end, the carrying amount
of an equity investment is compared to its value in use, and if the
latter is lower than the carrying amount, impairment is recognized
in order to reduce the carrying amount to the value in use.
The different methods used to determine the value in use are
described in Note B.4 to the financial statements and are as
follows:
■Equity investments in active subsidiaries are valued on the basis
of a multiple of revenue adjusted for the net cash position of
the subsidiary, or alternatively on the basis of discounted
forecast cash flows for recently acquired entities;
■Equity investments in subsidiaries that are dormant or with
reduced activity are valued on the basis of the share of net
equity attributable to ESI Group.
Estimating the value in use of these equity investments, which
represent a material amount in the balance sheet assets, requires
the exercise of Management’s judgment in identifying the criteria
determining the valuation method to be used and the factors to be
considered according to the investments concerned, particularly
historical items (shareholders’ equity) or forecasts (profitability
prospects).
We therefore considered the valuation of equity investments to be
a key audit matter.
We reviewed the compliance of the method used by your Company
for the valuation of equity investments with the accounting rules
and principles in force.
Our work consisted in reviewing the justification provided by
Management for the valuation method and the data used. Our
examination of the method applied, according to the equity
investments concerned, is detailed as follows:
For the main equity investments in active subsidiaries:
■We assessed the reasonableness of the multiple of revenue
used;
■We verified the calculations made and compared revenue and
net cash amounts with the corresponding entities’ accounts.
For the main equity investments in subsidiaries that are dormant or
with reduced activity, we reconciled the amounts of shareholders’
equity retained with the accounts of the corresponding entities;
Specific Verifications
We have also performed, in accordance with professional standards applicable in France, the specific verifications required by laws and
regulations.
/ Information given in the management report and in the other documents with respect
to the financial position and the financial statements provided to the shareholders
We have no matters to report as to the fair presentation and the consistency with the financial statements of the information given in the
Board of Directors’ management report and in the other documents with respect to the financial position and the financial statements
provided to the shareholders.
We attest the fair presentation and the consistency with the financial statements of the information relating to payment deadlines mentioned
in Article D. 441-6 of the French Commercial Code (Code de commerce).
/ Report on Corporate Governance
We attest that the Board of Directors’ Report on Corporate Governance sets out the information required by Articles L. 225-37-4, L. 22-10-10
and L. 22-10-9 of the French Commercial Code (Code de commerce).
Concerning the information given in accordance with the requirements of Article L. 22-10-9 of the French Commercial Code (Code de
commerce) relating to the remuneration and benefits received by, or allocated to the directors and any other commitments made in their favor,
we have verified its consistency with the financial statements, or with the underlying information used to prepare these financial statements
and, where applicable, with the information obtained by your Company from companies controlled thereby, included in the consolidation
scope. Based on these procedures, we attest the accuracy and fair presentation of this information.
With respect to the information relating to items that your Company considered likely to have an impact in the event of a takeover bid or
exchange offer, provided pursuant to Article L. 22-10-11 of the French Commercial Code (Code de commerce), we have agreed this information
to the source documents communicated to us. Based on these procedures, we have no observations to make on this information.
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/ Other information
In accordance with French law, we have verified that the required information concerning the identity of the shareholders and holders of
voting rights has been properly disclosed in the management report.
Report on Other Legal and Regulatory Requirements
/ Format of preparation of the financial statements intended to be included
in the annual financial report
We have also verified, in accordance with the professional standard applicable in France relating to the procedures performed by statutory
auditors regarding the annual and consolidated financial statements prepared in the European single electronic format, that the preparation
of the financial statements intended to be included in the annual financial report mentioned in Article L. 451-1-2, I of the French Monetary and
Financial Code (Code monétaire et financier), prepared under the CEO’s responsibility, complies with the single electronic format defined in
Commission Delegated Regulation (EU) No. 2019/815 of December 17, 2018.
On the basis of our work, we conclude that the preparation of the financial statements intended to be included in the annual financial report
complies, in all material respects, with the European single electronic format.
We have no responsibility to verify that the financial statements that will ultimately be included by your Company in the annual financial report
filed with the AMF (Autorité des marchés financiers) agree with those on which we have performed our work.
/ Appointment of the Statutory Auditors
We were appointed as statutory auditors of ESI Group by your Annual General Meeting held on June 22, 2021 for KPMG S.A. and on
December 16, 1997 for ERNST & YOUNG Audit.
As at December 31, 2022, KPMG S.A. was in its second year of total uninterrupted engagement and ERNST & YOUNG Audit in its twenty-sixth
year (including twenty-three years since the securities of the Company were admitted to trading on a regulated market).
Responsibilities of Management and Those Charged with Governance
for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with French accounting
principles and for such internal control as Management determines is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, Management is responsible for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is expected to liquidate
the Company or to cease operations.
The Audit Committee is responsible for monitoring the financial reporting process and the effectiveness of internal control and risk
management systems and where applicable, its internal audit, regarding the accounting and financial reporting procedures.
The financial statements were approved by the Board of Directors.
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2
3
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5
6
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9
Statutory Auditors’ Responsibilities for the Audit of the Financial Statements
/ Objectives and audit approach
Our role is to issue a report on the financial statements. Our objective is to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with professional standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users made on the basis of these financial statements.
As specified in Article L. 823-10-1 of the French Commercial Code (Code de commerce), our statutory audit does not include assurance on the
viability of the Company or the quality of management of the affairs of the Company.
As part of an audit conducted in accordance with professional standards applicable in France, the statutory auditor exercises professional
judgment throughout the audit and furthermore:
■Identifies and assesses the risks of material misstatement of the financial statements, whether due to fraud or error, designs and performs
audit procedures responsive to those risks, and obtains audit evidence considered to be sufficient and appropriate to provide a basis for
his opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
■Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control;
■Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by Management in the financial statements;
■Assesses the appropriateness of Management’s use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as
a going concern. This assessment is based on the audit evidence obtained up to the date of his audit report. However, future events or
conditions may cause the Company to cease to continue as a going concern. If the statutory auditor concludes that a material uncertainty
exists, there is a requirement to draw attention in the audit report to the related disclosures in the financial statements or, if such
disclosures are not provided or inadequate, to modify the opinion expressed therein;
■Evaluates the overall presentation of the financial statements and assesses whether these statements represent the underlying
transactions and events in a manner that achieves fair presentation.
/ Report to the Audit Committee
We submit to the Audit Committee a report which includes in particular a description of the scope of the audit and the audit program
implemented, as well as the results of our audit. We also report significant deficiencies, if any, in internal control regarding the accounting and
financial reporting procedures that we have identified.
Our report to the Audit Committee includes the risks of material misstatement that, in our professional judgment, were of most significance in
the audit of the financial statements of the current period and which are therefore the key audit matters that we are required to describe in
this report.
We also provide the Audit Committee with the declaration provided for in Article 6 of Regulation (EU) No. 537/2014, confirming our
independence within the meaning of the rules applicable in France as set out in particular in Articles L. 822-10 to L. 822-14 of the French
Commercial Code (Code de commerce) and in the French Code of Ethics for Statutory Auditors (Code de déontologie de la profession de
commissaire aux comptes). Where appropriate, we discuss with the Audit Committee the risks that may reasonably be thought to bear on our
independence, and the related safeguards.
Paris-La Défense, 17 March 2023
The Statutory Auditors
French original signed by:
KPMG Audit
Département de KPMG S.A.
ERNST & YOUNG Audit
Stéphanie Ortega
Pierre-Henri Pagnon
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FINANCIAL STATEMENTS
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2
3
4
5
6
7
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9
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RESOLUTIONS SUBMITTED TO THE GENERAL MEETING
Delegation of authority to the Board of Directors
to award free shares to eligible employees and
corporate officers of the Company and its affiliates
13.
Powers to carry out formalities
1.
Approval of the parent company financial
statements for the financial year ended December
31, 2022
2.
Approval of the total expenses and charges not
deductible from profits subject to income tax
3.
Approval of the consolidated financial statements
for the financial year ended December 31, 2022
4.
Allocation of net result for the year
5.
Special report of the Statutory Auditors on the
regulated agreements and commitments referred
to in Article L. 225-38 of the French Commercial
Code
6.
Approval of the total compensation paid or
allocated to the members of the Board of Directors,
the Chairman of the Board of Directors, and the
Chief Executive Officer for the financial year ended
on December 31, 2022, in accordance with Article L.
22-10-34 I of the French Commercial Code
7.
Approval of the components of the total
compensation paid or allocated to Alex Davern,
Chairman of the Board of Directors , for the
financial year ended on December 31, 2022
8.
Approval of the components of the total
compensation paid or allocated to Cristel de
Rouvray, Chief Executive Officer, for the financial
year ended on December 31, 2022
9.
Approval of the remuneration policy for the
Chairman of the Board of Directors for 2023
financial year, in accordance with Article
L. 22-10-8 II of the French Commercial Code
10.
Approval of the remuneration policy for the
Chief Executive Officer for 2023 financial year, in
accordance with Article L. 22-10-8 II of the French
Commercial Code
11.
Approval of the remuneration policy for the
members of the Board of Directors for 2023
financial year, in accordance with Article
L. 22-10-8 II of the French Commercial Code
12.
Authorization for the Board of Directors to buy
back the Company’s own shares in accordance with
article L. 22-10-62 of the French Commercial Code
1
8
9
10
11
12
14
2
3
4
5
6
7
13
Joint DECISIONS
DECISIONS FALLING WITHIN THE COMPETENCE of the Ordinary General Meeting
DECISIONS FALLING WITHIN THE
COMPETENCE vof the Extraordinary
General Meeting
This section outlines the issues and key points arising from the proposed resolutions to be submitted by the Board of Directors
for approval at the Shareholders’ Meeting on June 29, 2023. It is not intended to be exhaustive, and you should therefore read the
proposed resolutions carefully before voting at the Meeting.
IN BRIEF
CHAPTER 7
7
RESOLUTIONS
SUBMITTED TO
THE GENERAL MEETING
7.1.
DECISIONS FALLING WITHIN THE COMPETENCE
OF THE ORDINARY GENERAL MEETING
172
7.2.
DECISIONS FALLING WITHIN THE COMPETENCE
OF THE EXTRAORDINARY GENERAL MEETING
175
7.3.
JOINT DECISIONS
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7.1.
DECISIONS FALLING WITHIN THE COMPETENCE
OF THE ORDINARY GENERAL MEETING
4First, second, third and fourth resolutions
Statement of reasons
ESI Group achieves key milestones of OneESI 2024 Plan, delivering
strong results in 2022. ESI Group has made significant progress on
its strategic plan, on track with expectations for the fiscal year
2022.
Having reviewed the management report of the Board of Directors,
the reports of the Statutory Auditors on financial statements, you
are asked to vote on the parent company and consolidated
financial statements for the financial year ended December 31,
2022, and on the transactions reflected therein or summarized in
these reports.
At December 31, 2022:
■The Company financial statements showed a positive result of
€41,737,071.95;
■The total expenses and charges not deductible from profits
subject to income tax, equal to €216,539.84;
■The Company’s consolidated financial statements showed a
positive net result of €15,420,585.
The General Meeting is requested to allocate the profit of
€41,737,071.95 as follows:
■€17,317.20 to the legal reserve;
■€41,719,754.75 to retained earnings.
Following this allocation, the balance of the legal reserve will stand
at €1,822,684.80.
Following this allocation, retained earnings will stand at
€11,984,802.27.
The Board of Directors reminds the General Meeting that no
dividends have been paid out for the past three financial years.
4First resolution
Approval of the parent company financial statements
for the financial year ended December 31, 2022
The General Meeting, having reviewed the management report of
the Board of Directors, and the reports of the Statutory Auditors on
the parent company financial statements and the parent company
financial statements for the financial year ended December 31,
2022, approves the financial statements and balance sheet, as
presented, showing a positive result of €41,737,071.95.
It approves the transactions reflected in said financial statements or
summarized in said reports.
4Second resolution
Approval of the total expenses and charges not deductible
from profits subject to income tax
The General Meeting, having reviewed the management report of
the Board of Directors, and the reports of the Statutory Auditors on
the parent company financial statements and the parent company
financial statements for the financial year ended December 31,
2022, approves the total expenses and charges not deductible from
profits subject to income tax, equal to €216,539.84.
4Third resolution
Approval of the consolidated financial statements
for the financial year ended December 31, 2022
The General Meeting, having reviewed the management report of
the Board of Directors, and the reports of the Statutory Auditors on
the consolidated financial statements and the consolidated financial
statements as at December 31, 2022, approves these financial
statements as presented, resulting in a +€15,420,585 profit.
4Fourth resolution
Allocation of net profit for the year
The General Meeting, noting that the net positive result for the year
ended December 31, 2022 amounted to €41,737,071.95, decides,
on a proposal from the Board of Directors, to allocate the result as
follows:
Current position:
■Net result for the year: +€41,737,071.95;
■Retained earnings: -€29,734,952.48;
■Total to be allocated: €12,002,119.47.
Allocated as follows:
■€17,317.20 to the legal reserve;
■€11,984,802.27 to retained earnings.
Following this allocation, the balance of the legal reserve will stand
at €1,822,684.80.
Following this allocation, creditor retained earnings will stand at
€11,984,802.27.
The Board of Directors reminds the General Meeting that no
dividends have been paid out for the past three financial years.
4Fifth resolution
Special report of the Statutory Auditors on the regulated
agreements and commitments referred to in Article L. 225-38
of the French Commercial Code
Statement of reasons
Based on the special report by the Statutory Auditors on regulated
agreements presented in section 2.6 of the 2022 Universal
Registration Document, the General Meeting is requested to
acknowledge that during the financial year ended on December 31,
2022, no new agreement gave rise to the procedure provided for
in Articles L. 225-38 et seq. of the French Commercial Code
mentioning the presence of one new regulated agreement for the
2022 fiscal year.
The General Meeting, having reviewed the special report by the
Statutory Auditors on the agreements and commitments referred
to in Articles L. 225-38 et seq. of the French Commercial Code, takes
note of the conclusions of the said report.
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4Sixth, seventh and eighth resolutions
Statement of reasons
In accordance with Article L. 22-10-34 of the French Commercial
Code, the General Meeting is requested every year to approve the
fixed, variable and exceptional components of the total
remuneration and benefits of all kinds paid or allocated to the
Chairman of the Board of Directors and Chief Executive Officer in
respect to their mandate.
The compensation was paid or awarded in accordance with the
compensation policy approved by the Shareholders’ Meeting on
June 28, 2022. It is reminded that payment of the variable and
exceptional compensation is contingent upon shareholder’s
approval at the 2023 Shareholders’ Meeting.
These components of the remuneration, approved by the Board
of Directors under the recommendation of the Compensation
Committee, are presented in the report of the Board of Directors
on corporate governance in section 2.4 of the 2022 Universal
Registration Document.
4Sixth resolution
Approval of the total compensation paid or allocated
to the members of the Board of Directors, the Chairman
of the Board of Directors and the Chief Executive Officer for the
financial year ended on December 31, 2022, in accordance with
Article L. 22-10-34 I of the French Commercial Code
The General Meeting, having reviewed the report of the Board of
Directors on corporate governance, approves, in accordance with
the provisions of Article L. 22-10-34 I of the French Commercial
Code, the information referred to in Article L. 22-10-9 I of the
French Commercial Code relating to the compensation paid or
allocated to corporate officers during the financial year ended
31 December 2022, as described in paragraph 2.4 and in particular
2.4.3.1.13 of the Company’s 2022 Universal Registration Document.
4Seventh resolution
Approval of the components of the total compensation paid
or allocated to Alex Davern, Chairman of the Board of Directors,
for the financial year ended on December 31, 2022
The General Meeting, having reviewed the report of the Board of
Directors on corporate governance and in accordance with Article
L. 22-10-34 II of the French Commercial Code, approves the fixed,
variable and exceptional components of the total compensation
and benefits of all kinds paid or allocated for the financial year
ended on December 31, 2022 to Alex Davern, Chairman of the
Board of Directors, as described in paragraph 2.4.3.1.1 of the
Company’s 2022 Universal Registration Document.
4Eighth resolution
Approval of the components of the total compensation paid
or allocated to Cristel de Rouvray, Chief Executive Officer,
for the financial year ended on December 31, 2022
The General Meeting, having reviewed the report of the Board of
Directors on corporate governance and in accordance with Article
L. 22-10-34 II of the French Commercial Code, approves the fixed,
variable and exceptional components of the total compensation
and benefits of all kinds paid or allocated for the financial year
ended on December 31, 2022 to Cristel de Rouvray, Chief Executive
Officer, as described in paragraph 2.4.3.1.13 of the Company’s 2022
Universal Registration Document.
4Ninth, tenth and eleventh resolutions
Statement of reasons
In accordance with Article L. 22-10-8 of the French Commercial
Code, the General Meeting is requested every year to approve the
principles and criteria for determining, distributing and allocating
the fixed, variable and exceptional components of the total
remuneration and benefits of all types attributable to the
Chairman of the Board of Directors and the Chief Executive Officer,
in respect to their mandate for 2022 financial year.
The remuneration policy applicable to corporate officers, approved
by the Board of Directors under the recommendation of the
Compensation committee, is presented in the report of the Board
of Directors on corporate governance in section 2.4.1 of the 2022
Universal Registration Document.
4Ninth resolution
Approval of the remuneration policy for the Chairman
of the Board of Directors for 2023 financial year, in accordance
with Article L. 22-10-8 II of the French Commercial Code
The General Meeting, having reviewed the report of the Board of
Directors on corporate governance and in accordance with Articles
L. 22-10-8 II and R. 22-10-14 of the French Commercial Code,
approves the remuneration policy attributable to the Chairman of
the Board of Directors for the 2023 financial year, as described in
this report and set out in paragraph 2.4.1.1 of the Company’s 2022
Universal Registration Document.
4Tenth resolution
Approval of the remuneration policy for the Chief Executive Officer
for 2023 financial year, in accordance with Article L. 22-10-8 II
of the French Commercial Code
The General Meeting, having reviewed the report of the Board of
Directors on corporate governance and in accordance with Articles
L. 22-10-8 II and R. 22-10-14 of the French Commercial Code,
approves the remuneration policy attributable to the Chief
Executive Officer for the 2023 financial year, as described in this
report and set out in paragraph 2.4.1.2 of the Company’s 2022
Universal Registration Document.
4Eleventh resolution
Approval of the remuneration policy for the members
of the Board of Directors for 2023 financial year, in accordance
with Article L. 22-10-8 II of the French Commercial Code
The General Meeting, having reviewed the report of the Board of
Directors on corporate governance and in accordance with Articles
L. 22-10-8 II and R. 22-10-14 of the French Commercial Code,
approves the remuneration policy attributable to members of the
Board of Directors for the 2023 financial year, as described in this
report and set out in the paragraph 2.4.1.1 of the Company’s 2022
Universal Registration Document.
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4Twelfth resolution
Authorization for the Board of Directors to buy back
the Company’s own shares in accordance with article L. 22-10-62
of the French Commercial Code
Statement of reasons
As the existing authorization will expire in December 2023, it is
proposed to the General Meeting to terminate this authorization
and grant the Board of Directors a new authorization for the
Company to buy back its own shares for a new period of
18 (eighteen) months as from the General Meeting of June 29,
2023.
It is proposed to set the maximum purchase price at €150
(hundred fifty) per share. Pursuant to current legislation, the
maximum number of shares that may be purchased is limited to
10% of the capital, taking into account the treasury stock already
held by the Company, 5.38% as at December 31, 2022. Stated
otherwise the Company will not be allowed to pay out more than
€40,000,000 (forty million) under the share buyback program.
The Company can buy back its own shares to:
■Stimulate the secondary market or the liquidity of ESI Group
shares through a liquidity contract signed with Crédit Industriel
et Commercial S.A;
■Allocate them to free share awards or stock purchase options;
■Hold them and use them at a later date as payment for
acquisitions;
■Cancel them by a reduction in share capital.
For information purposes, the use of the previous authority is
reported in the paragraph 2.5.3 of the present Company's
Universal Registration Document for the year ending
December 31, 2022.
The General Meeting, having reviewed the report of the Board of
Directors in accordance with Article L. 22-10-62 of the French
Commercial Code, Articles 241-1 et seq. of the General Regulations
of the Autorité des Marchés Financiers (“AMF”) and the European
regulations resulting from European Regulation (EU) No 596/2014
of 16 April 2014:
1. Authorizes the Board of Directors to purchase the Company’s
shares, not to exceed 10% of its capital, for a period of
18 months beginning on June 29, 2023, in order to:
i. Stimulate the secondary market or the liquidity of ESI Group
shares through a liquidity contract signed with an investment
service provider and compliant with accepted market practice
by the French Financial Markets Authority (AMF),
ii. Fulfill its share issue obligations, in accordance with the terms
and conditions set forth by law, undertaken as part of the
following:
• Plans granting stock options for the purchase of existing
shares by the Group’s employees or corporate officers,
• Employee profit-sharing plans under which these shares
would be granted to employees and/or corporate officers,
• Free share grants to the Group’s employees and corporate
officers,
• Shares provided upon exercise of the rights attached to
securities giving access to shares by any means, whether
immediately or in the future, under the conditions set forth by
the AMF and at any time deemed appropriate by the Board of
Directors.
iii.Retain shares to subsequently use them in exchange or as
payment for future business acquisitions,
iv.Cancel shares by a reduction in share capital;
2. Decides that the purchase price per share may not exceed €150
(hundred fifty);
3. Decides to fix the maximum amount that the Company may
spend within the framework of this buyback program at
€40,000,000 (forty million);
4. Acknowledges that this authorization shall render ineffective the
previous authorization granted by the eighteenth resolution of
the Combined General Meeting of June 28, 2022 authorizing the
Board to trade on its own shares;
5. Decides that the shares may be purchased or retained at the
discretion of the Board of Directors by any means by trading on
or off the market, or on an over-the-counter market, on one or
more occasions. All shares purchased under the authorized
share buyback program may be acquired in the form of blocks of
shares. Such transactions may be carried out at any time,
including during public offering periods, in accordance with the
regulations in force;
6. Acknowledges that the Company may not, at any time, hold,
either directly or via an intermediary, more than 10% of the total
shares making up its own share capital;
7. Grants full authority to the Board of Directors to:
• Publish, on the website of the AMF, a detailed notice
explaining this share buyback program authorized by the
General Meeting prior to using this authorization,
• Place any and all stock market orders and enter into any and
all agreements to record share purchases and sales,
• Make any and all disclosures to the stock market regulators,
carry out any other formalities and, in general, take any
necessary steps.
The Board of Directors shall inform shareholders of any purchases
or sales carried out pursuant to this authorization in its
management report.
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7.2.
DECISIONS FALLING WITHIN THE COMPETENCE
OF THE EXTRAORDINARY GENERAL MEETING
4Thirteenth resolution
Delegation of authority to the Board of Directors to award
free shares to eligible employees and corporate officers
of the Company and its affiliates
Statement of reasons
As the Company is considering the granting of free shares to
employees and corporate officers of the Company and its affiliates,
it is proposed to the General Meeting to grant to the Board of
Directors a new authorization for this purpose, the previous
authorization granted by the nineteenth resolution of the
Shareholder's Meeting of June 28, 2022, remains in force until the
number of shares to be granted free of charge is exhausted.
Under the scope of this new authorization, the number of free
shares that may be granted may not exceed 60,000 shares,
representing around 1% of the share capital existing on June 29,
2023.
ESI objective is to align with best practices with companies that ESI
competes with for talent, to attract and retain the needed talents
to achieve the three-year strategic objectives.
The Board of Directors will decide the identity of the beneficiaries
of the grants, the number of shares allocated to each one, the
terms, and, where applicable, the criteria for such share grants.
The Board of Directors will be able to set, in accordance with the
provisions of Article L. 225-197-2 of the French Commercial Code,
the duration of vesting and holding periods, provided that the time
condition respects a minimum vesting period of at least one year
and the total duration of both vesting and holding periods is at
least two years. Pursuant to Article L. 225-197-2 of the French
Commercial Code, the free grant of shares to their beneficiaries will
become final and binding subject to the satisfaction of the other
conditions set at the time of the grant, and specifically the
employment condition and/or the performance condition, after a
vesting period set out by the Board of Directors.
The General Meeting, having reviewed the report of the Board of
Directors and the special report of the Statutory Auditors, and in
accordance with Articles L. 225-197-1 et seq., L. 225-197-2,
L. 22-10-59 and L. 22-10-60 of the French Commercial Code:
1. Authorizes the Board of Directors to carry out, on one or several
occasions, free grants of existing shares or shares to be issued
by ESI Group, to employees and corporate officers of the
Company or its affiliated entities, in accordance with Article
L. 225-197-2 of the French Commercial Code and the conditions
set out hereinafter;
2. Resolves that the Board of Directors will decide the identity of
the beneficiaries of the grants, the number of shares allocated to
each one, as well as the conditions, and, where applicable, the
criteria for such share grants;
3. Decides that the number of free shares that may be granted
under the scope of this authorization may not exceed 1% of the
share-capital existing on the date of grant of the free shares by
the Board of Directors and limited to 60,000 shares;
4. Decides that the Board of Directors will be able to set, in
accordance with the provisions of Article L. 225-197-1 of the
French Commercial Code, the duration of vesting and holding
periods, provided that the time condition respects a minimum
vesting period of at least one year and the total duration of both
vesting and holding periods is at least two years;
5. Decides that the free grant to their beneficiaries will become
final and binding after a vesting period set out by the Board of
Directors;
6. Authorizes the Board of Directors to vest the shares prior to the
end of the vesting period as well as to permit the free transfer of
these shares in the event the beneficiary has a disability
corresponding to the second or third categories defined by
Article L. 341-4 of the French Social Security Code;
7. Decides that the Board of Directors shall have all powers,
including powers of sub-delegation in accordance with the legal
requirements, to implement this authorization, and, in particular,
in order to:
a. Determine whether to grant existing shares or whether to
issue shares for such purpose,
b. Determine all the terms relating to the granting of shares, in
particular the conditions under which such shares will be
vested (especially the presence and, if any, performance
conditions), define the categories of beneficiaries, the
beneficiaries and establish the number of shares granted to
each of them and the grant date or dates in compliance with
the law and regulations in force as of the date of transactions
contemplated,
c. Carry out, if applicable, the increase of the share capital of the
Company at the end of the vesting period,
d. Adjust, during the vesting period, if it deems necessary, the
number of shares granted in order to protect the rights of the
beneficiaries, in compliance with the laws and regulations in
force as of the date of the transactions contemplated, based
on potential Company equity transactions, it being specified
that the shares, granted further to these adjustments, shall be
deemed granted on the same date as, that of the initial share
grant, and
e. More generally, to take all necessary measures, in particular to
conclude any and all agreements and contracts to effect the
closing of an issuance, to carry out any and all formalities to
effect the related share capital increase or increases
subsequent to the vesting of Company shares, to amend the
articles of association;
8. Acknowledges that this authorization automatically entails the
waiver by shareholders of their preferential subscription rights
to ordinary Company shares which may be issued for the
purposes of the vesting of free shares, and of all rights to
ordinary shares granted under the scope of this authorization;
9. Acknowledges that this authorization shall not supersede the
unused portion of the previous authorization granted by the
nineteenth resolution of the Combined General Meeting held on
June 28, 2022.
Each
year,
in
accordance
with
the
legal
and
regulatory
requirements, in particular pursuant to Article L. 225-197-4 of the
French Commercial Code, the Board of Directors shall inform the
General Meeting about the operations carried out under this
authorization.
This authorization is granted to the Board of Directors for a
duration of 38 (thirty-eight) months from the date of this Meeting.
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7.3.
JOINT DECISIONS
4Fourteenth resolution
Powers to carry out formalities
Statement of reasons
This resolution is intended to grant the powers necessary to carry
out formalities subsequent to the General Meeting.
The General Meeting grants full powers to the bearer of an original,
excerpt or copy of the minutes of this Meeting to carry out all legal
and administrative formalities, as well as all filing and publication
requirements set forth by applicable law.
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8
INFORMATION
ON THE COMPANY
AND SHARE CAPITAL
8.1.
INFORMATION ON THE COMPANY
178
8.1.1.
General information
178
8.1.2.
Information regarding rights, privileges and restrictions
attached to shares
178
8.1.3.
Information concerning administrative and management bodies
179
8.2.
INFORMATION ON THE COMPANY’S CAPITAL
179
8.2.1.
Statutory requirement governing modifications to the capital
and rights attached to shares (Article 8 of the articles of
association)
179
8.2.2.
Issued share capital and authorized unissued share capital
180
8.2.3.
History of changes in share capital
180
8.2.4.
Dividend distribution policy
180
8.2.5.
Corporate shareholding structure
180
8.2.6.
Company share buybacks
183
8.3.
ESI SHARES – MARKET
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CONTENTS
8.1.
INFORMATION ON THE COMPANY
8.1.1. General information
Corporate name and head office
ESI Group
3 bis, rue Saarinen
Immeuble Le Séville
94528 Rungis Cedex France
Legal form
ESI Group is a French limited company (société anonyme) with a
Board of Directors.
Legislation governing the issuer
French.
Date of incorporation and term
of the issuer
ESI Group was incorporated on January 28, 1991. The term of the
Company is 99 years from registration, unless extended or
dissolved before such time.
Company registration
Créteil Trade and Companies Registry No. 381 080 225.
Legal Entity Identifier (LEI)
LEI – 969500SJCEYK6O6RXV95
Phone number
+33 (0) 1 41 73 58 00
E-mail
communication@esi-group.com
Corporate purpose (Article 2
of the articles of association)
The Company pursues the following corporate purpose in France
and in all other countries:
■To research, develop, design, manufacture and distribute
computer software. To provide all forms of assistance, training
and, in general, all activities that may be directly or indirectly
related to the corporate purpose;
■To acquire, receive, hold, manage and trade in a portfolio of
securities, especially in fields related to the publishing of
scientific software, including digital simulation software for
prototyping and manufacturing processes and related decision-
making support tools.
The Company may perform any of the above-mentioned operations
on its own behalf or on behalf of third parties by creating new
companies, forming partnerships, subscribing to shares in existing
companies, purchasing securities or rights to equity instruments,
merging companies, forming business alliances, undertaking joint
investments, obtaining the use of any property under a lease or
lease management agreement, forming joint ventures or otherwise.
To this end, the Company carries out any and all economic or
financial studies necessary and provides recommendations in
relation to investments, acquisitions and divestitures. It also helps
as a management consultant to companies in which it holds a stake
and to other companies. It prepares all types of reports and expert
opinions; it assists with business restructuring measures and
mergers.
In general, it carries out any and all financial, commercial or
industrial operations and real estate and property transactions that
may be directly or indirectly related to the corporate purpose of the
Company or likely to promote the Company’s expansion or growth.
Financial year (Article 22 of the articles
of association)
The financial year begins on January 1 and ends on December 31 of
each year. It covers 12 months.
Exceptional events and disputes
To the best of the Company’s knowledge, there is no exceptional
event or dispute that may have or has had a material impact on the
financial position or profit of the Company or the Group of which it
is a part.
Except for disputes arising in the ordinary course of business, the
Company was not involved in any governmental, judicial or
arbitration procedure during the exercise that ended at
December 31, 2022.
8.1.2. Information regarding rights, privileges and restrictions
attached to shares
Allocation of income and distribution
of profits (Article 22 of the articles
of association)
Pursuant to Article 22 of the articles of association, 5% of the net
profit for the financial year, less any losses carried forward, will be
set aside to form the legal reserve fund; this deduction is no longer
required once the legal reserve has reached one-tenth of the share
capital; the requirement applies again when, for any reason, the
reserve falls below said one-tenth fraction.
The balance of said profit, plus any retained earnings, forms the
profit available for distribution.
Shareholders have sole control over this profit and decide how it
will be appropriated at the Annual General Meeting. To this end, the
Annual General Meeting may decide to allocate this profit, in full or
in part, to any general or special reserve funds, carry it forward or
distribute it to the shareholders.
However, except in the case of a capital reduction, no profit may be
distributed to the shareholders if net assets are or will subsequently
become less than the total capital plus reserves that may not be
distributed in accordance with the law or the articles of association.
Any losses are recorded in the balance sheet under a special
account once the financial statements have been approved by the
Annual General Meeting.
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INFORMATION ON THE COMPANY
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The General Meeting has the faculty to allow each shareholder, for
all or part of the dividend distributed or advances on dividends, an
option between the payment of the dividend or advances on
dividends in cash or in shares.
Provisions of the articles of association
concerning the participation of
shareholders in General Meetings
(Articles 18 and 19 of the articles
of association)
Please refer to section 2.5.3 of this Universal Registration
Document.
Shareholders’ right to information
(Article 21 of the articles of association)
All shareholders are entitled to receive information, and the Board
of Directors is required to send or make available any documents
necessary for shareholders to make informed decisions relating to
the management and situation of the Company.
Shareholders’ right to information, the nature of documents
provided and the arrangements for such documents to be made
available or transmitted shall adhere to the terms set out by
applicable law.
Double voting rights (Article 9
of the articles of association)
In accordance with Article 9 of the articles of association, each share
gives its holder ownership interest in the Company’s assets and
profits, proportionate to the percentage of the share capital the
share represents.
Anyone who has held fully paid-up registered shares for at least
four years as of the date of the Extraordinary General Meeting of
June 14, 2000 or thereafter is entitled to double voting rights under
the law.
Furthermore, if the capital is increased through the capitalization of
reserves, profits or share premiums, this double voting right will
apply, from the time of issue, to registered shares awarded free of
charge to shareholders on the basis of shares already held that
bear this entitlement.
Any shares converted to bearer shares or transferred to a different
owner are stripped of double voting rights, although other rights
and obligations attached to the share are transferred to any owner
thereof.
However, double voting rights are not lost and the above-
mentioned four-year period is not interrupted in the event that
shares are transferred by way of an inheritance, following the
liquidation of a marital estate, or in the form of an inter vivos gift to a
spouse or a relative in the direct line of succession.
Shareholding thresholds (Article 9 B
of the articles of association)
In accordance with the provisions of Article L. 233-7 of the French
Commercial Code, any natural or legal person, acting alone or in
concert, that comes to own, directly or indirectly, a number of
shares accounting for more than the twentieth, the tenth, the three-
twentieths, the fifth, the quarter, the three-tenths, the third, the half,
the two thirds, the eighteen twentieths or the nineteen twentieths
of the share capital or voting rights is required to so inform the
Company as provided by law.
In case they are not declared, the shares exceeding the
participation to be declared are deprived of the right to vote under
the conditions provided for by Article 233-14 of the French
Commercial Code, i.e. for a period of two years from the
regularization of the notification.
In addition to the obligations provided for in paragraph 1 of Article
L. 233-7 of the French Commercial Code, any crossing of a statutory
threshold of 2.5% (and any multiple of this fraction) of the total
number of shares or the Company’s voting rights must be declared
at the latest on the fourth trading day following the day the
threshold is crossed.
Form and transfer of shares (Article 9
of the articles of association)
/ Form
Shareholders may opt to hold fully paid-up shares as either
registered shares or bearer shares. Shares will be recorded in the
Company’s accounts in accordance with the terms and procedures
set forth by law.
/ Transfer of shares
Shares may be freely traded unless otherwise stipulated by law or
regulation. Shares may be sold or traded by the Company and by
third parties via transfer between accounts in accordance with the
regulations in force.
8.1.3. Information concerning administrative and management bodies
Information on administrative and management bodies, as well as their respective authority, is presented in chapter 2, “Corporate
governance”.
8.2.
INFORMATION ON THE COMPANY’S CAPITAL
8.2.1. Statutory requirement governing modifications to the capital
and rights attached to shares (Article 8 of the articles of association)
Extraordinary General Meetings have sole authority to decide to
carry out or to authorize capital increases, upon recommendation
by the Board of Directors.
If the share capital is increased through the capitalization of
reserves, profit or share premiums, the General Meeting may make
such decision in accordance with the requirements for quorum and
majority set forth for Ordinary General Meetings.
The share capital must be fully paid up prior to any issue of new
shares to be paid up in cash; otherwise the transaction may be
declared null and void.
Shareholders are entitled, in proportion to their total shares, to
preferential subscription rights to shares issued for cash as part of
a capital increase.
INFORMATION ON THE COMPANY AND SHARE CAPITAL
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8
9
The value of any contributions in kind must be appraised by one or
more contribution appraisers appointed upon request by the
presiding judge of the relevant commercial court.
Shares representing contributions in kind or stemming from the
capitalization of profits or reserves must be fully paid up upon
issuance.
At least one-fourth of the value of cash shares and the entire share
premium, where applicable, must be paid up at the time of
subscription. The remainder must be paid up in one or more
instalments within a period of five years from the date on which the
capital increase was finalized.
Subject to the restrictions and reserves set forth by law,
Extraordinary General Meetings may also decide to carry out or
authorize a reduction in the share capital for any reason or in any
manner whatsoever, including due to losses or via repayment or
partial buyback of shares, reduction in the number of shares, or
reduction in the par value of shares; under no circumstances may
the reduction in capital undermine the principle of equality between
shareholders.
8.2.2. Issued share capital and authorized unissued share capital
For a summary of the delegations granted to the Board of Directors that may impact the Company’s share capital, please refer to section 2.5.2
of this Universal Registration Document.
8.2.3. History of changes in share capital
Change in share capital Issue
of cash shares
Meeting date
(1) Operation type
Par value
(in €)
Premium
(in €)
Number of
created
shares
Resulting
total share
capital
Number of
cumulated
shares
Par value
(in €)
BoD Meeting
of 02/01/2019
Share capital adjustment
Exercise of share subscription options
3
40,339
1,450
18,053,676
6,017,892
3
BoD Meeting
of 02/12/2020
Share capital adjustment
Exercise of share subscription options
3
16,692
600
18,055,476
6,018,492
3
BoD Meeting
of 02/08/2021
Share capital adjustment
Exercise of share subscription options
3
501,267
18,100
18,109,776
6,036,592
3
BoD Meeting
of 02/28/2022
Share capital adjustment
Exercise of share subscription options
3
705,333
27,549
18,192,423
6,064,141
3
BoD Meeting
of 02/27/2023
Share capital adjustment
Exercise of share subscription options
3
332,567
11,475
18,226,848
6,075,616
3
(a)
BoD: Board of Directors.
8.2.4. Dividend distribution policy
The Company has not distributed any dividends over the last five
financial years. Based on the results for 2022, the Board of
Directors has no intention to propose a dividend distribution.
The future dividend distribution policy will depend on the
Company’s results and financial position.
ESI Group’s dividend distribution policy is based on both prudent
capital management and the attractiveness of the share for the
shareholders.
8.2.5. Corporate shareholding structure
Shareholding structure
As of December 31, 2022, the shareholding structure of ESI Group
is as follows:
8
INFORMATION ON THE COMPANY AND SHARE CAPITAL
INFORMATION ON THE COMPANY’S CAPITAL
180
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
Board
of Directors
Public
Treasury share
88.5%
4.5%
Employees
1.7%
5.4%
CONTENTS
Change in the breakdown of the Company’s share capital
over the past three financial years
Over the past three financial years, the breakdown of share capital and voting rights evolved as follows:
At December 31, 2022
First and last name
Number of
shares
% of capital
Number of
voting rights
that may be
exercised
% of voting
rights that may
be exercised
Alexander Davern
11,333
0.19%
11,333
0.15%
Cristel de Rouvray
253,054
4.17%
506,108
6.58%
Charles-Helen des Isnards
3,551
0.06%
7,102
0.09%
Éric d’Hotelans
261
0.00%
522
0.01%
Véronique Jacq
157
0.00%
218
0.00%
Rajani Ramanathan
1
0.00%
2
0.00%
Yves de Balmann
1
0.00%
2
0.00%
Patrice Soudan
2,100
0.03%
2,100
0.03%
Members of the Board of Directors (registered shares)
270,458
4.45%
527,387
6.86%
Members of ESI Leadership Team (ELT)
35,064
0.58%
49,522
0.64%
Employee shareholding excl ELT (registered shares)
65,858
1.08%
102,009
1.33%
Public shareholding, registered shares
1,645,391
27.08%
3,341,696
43.45%
Public shareholding, bearer shares
3,699,544
60.89%
3,669,544
47.72%
Sub-total public shareholding
5,344,935
87.97%
7,011,240
91.17%
Treasury shares
359,301
5.91%
0
0.00%
TOTAL
6,075,616
100.00%
7,690,158
100.00%
Total number of theoretical voting rights: 8,049,459.
At the closing of the financial year 2022, the employee shareholding, as defined in Article L. 225-102 of the French Commercial Code, in the
Company’s share capital is 0.45%.
At December 31, 2021
First and last name
Number of shares
% of capital
Number of voting
rights that may
be exercised
% of voting rights
that may be
exercised
Alexander Davern
11,333
0.19%
11,333
0.15%
Cristel de Rouvray
253,054
4.17%
506,108
6.51%
Charles-Helen des Isnards
3,551
0.06%
7,102
0.09%
Éric d’Hotelans
261
0.00%
522
0.01%
Véronique Jacq
157
0.00%
218
0.00%
Rajani Ramanathan
1
0.00%
2
0.00%
Yves de Balmann
1
0.00%
2
0.00%
Patrice Soudan
2,100
0.03%
2,100
0.03%
Members of the Board of Directors
(registered shares)
270,458
4.46%
527,387
6.79%
Members of ESI Leadership Team (ELT)
27,598
0.46%
41,056
0.53%
Employee shareholding excl ELT (registered
shares)
315,672
5.21%
602,152
7.75%
Public shareholding, registered shares
1,509,915
24.90%
3,004,298
38.66%
Public shareholding, bearer shares
3,596,802
59.31%
3,596,802
46.28%
Sub-total public shareholding
5,106,717
84.21%
6,601,100
84.94%
Treasury shares
343,647
5.67%
—
0.00%
TOTAL
6,064,092
100.00%
7,771,695
100.00%
Total number of theoretical voting rights: 8,116,303.
INFORMATION ON THE COMPANY AND SHARE CAPITAL
8
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181
CONTENTS
1
2
3
4
5
6
7
8
9
At December 31, 2020
First and last name
Number of
shares
% of capital
Number of
voting rights
that may be
exercised
% of voting
rights that may
be exercised
Alain de Rouvray
1,207,391
20.00%
2,414,782
30.44%
Cristel de Rouvray
206,270
3.42%
412,540
5.20%
Amy de Rouvray
2,184
0.04%
4,368
0.06%
John Alexandre de Rouvray
204,270
3.38%
408,540
5.15%
Amy-Louise de Rouvray
204,275
3.38%
408,550
5.15%
Xiu Mei Dubois
25,200
0.42%
50,400
0.64%
Alex Peng Dubois-Sun
321,419
5.32%
642,838
8.10%
Sub-total of shareholders’ agreement*
(registered shares)
2,171,009
35.96%
4,342,018
54.74%
Vincent Chaillou
21,207
0.35%
37,404
0.47%
Charles-Helen des Isnards
3,551
0.06%
7,102
0.09%
Éric d’Hotelans
261
0.00%
522
0.01%
Véronique Jacq
157
0.00%
158
0.00%
Rajani Ramanathan
1
0.00%
2
0.00%
Yves de Balmann
1
0.00%
2
0.00%
Members of the Board of Directors (registered shares)
(excluding founders)
25,178
0.42%
45,190
0.57%
Total employee shareholding (registered shares)
82,155
1.36%
137,084
1.73%
Public shareholding, registered shares
23,808
0.04%
37,779
0.48%
Public shareholding, bearer shares
3,371,161
55.85%
3,371,161
42.49%
Sub-total public shareholding
3,394,969
56.24%
3,408,940
42.97%
Treasury shares
363,281
6.02%
—
0.00%
TOTAL
6,036,592
100.00%
7,933,232
100.00%
Total number of theoretical voting rights: 8,298,004.
* In May 2021, the shareholders’ agreement was terminated.
Shareholdings above legal thresholds
As of the filing date of this Universal Registration Document, the
following shareholders each held more than 5% of the Company’s
capital:
■Long Path Partners holds 930,463 shares, i.e. 15.34% of the
capital -11.5% of the voting rights;
■Briarwood Chase Management holds 650,988 shares, i.e. 10.74%
of the capital -8.04% of the voting rights;
■Alain de Rouvray holds 459,788 shares, i.e. 7.57% of the capital -
11.96% of the voting rights;
■Amy-Sheldon
Loriot
de
Rouvray
(Lawrence)
holds
418,586 shares, i.e. 6.89% of the capital - 10.89% of the voting
rights;
■Alex Peng Dubois-Sun holds 307,419 shares, i.e. 5.06% of the
capital - 8.00% of the voting rights.
Crossing of legal and statutory thresholds
declared to the Company during the
financial year ended December 31, 2022
and until the filing date of this Universal
Registration Document
As of the filing date of this Universal Registration Document, the
following exceedances of thresholds have been declared:
Long Path Partners
■By letter dated September 1, 2022 sent by the Long Path
Partners fund, declares that the latter has crossed the legal and
statutory threshold of 15% of the Company’s capital upwards
with 926,994 shares representing 15.28% of the shares and
11.44% of the voting rights.
Shareholders’ agreement
and other agreements
There is no shareholders’ agreement at the date of the publication
of this document.
Summary of transactions in Company
shares by corporate officers during the
financial year last ended (pursuant
to Article 223-26 of the General Regulation
of the Autorité des Marchés Financiers)
To the best of the Company’s knowledge, no transactions involving
securities, as referred to in Article L. 621-18-2 of the French
Monetary and Financial Code, were undertaken during the 2022
financial year by corporate officers.
8
INFORMATION ON THE COMPANY AND SHARE CAPITAL
INFORMATION ON THE COMPANY’S CAPITAL
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
8.2.6. Company share buybacks
The Shareholders’ Meeting of June 28, 2022 authorized the Board of
Directors. pursuant to the provisions of Article L. 22-10-62 of the
French Commercial Code, of European regulation No. 596/2014 of
April 16, 2014 on market abuse and of AMF’s General Rule, to
purchase or sell Company’s shares in the context of the
implementation of a buyback program. The maximum purchase
price has been fixed to €110 per share. The number of shares
acquired could not exceed 10% of the share capital. This
authorization was granted for a duration of 18 months and
supplanted the previous authorization of the Shareholders’ Meeting
of June 22, 2021.
The description of the share buyback program implemented by the
Board of Directors’ Meeting of June 28, 2022, pursuant to the
authorization granted by the Shareholders’ Meeting can be
consulted on the website.
Shares buyback for the financial year
ended December 31, 2022
In 2022, ESI Group bought back 30,000 shares at an average price
of €72.6627 between September 28 and December 19, 2022.
Cancellation of shares for the financial
year ended December 31, 2022
In 2022, ESI Group did not cancel any shares.
Assignments or transfers of shares
for the financial year ended
December 31, 2022
In 2022, ESI Group distributed 14.389 shares under its free share
plans.
Liquidity contract
A liquidity contract was concluded with CIC in 2009 and remains in
force. The monthly report on the liquidity contract is also available
on the website.
Table summarizing the operations of the Company on its own shares
during its financial year ended on December 31, 2022
________
Date of authorization by the General Meeting
Resolution 18 of June 28, 2022
Date of expiration of the authorization
December 28, 2023
Ceiling on authorized buybacks
10% of share capital at the transaction date
Maximum purchase price per share
€110
Authorized purposes
Cancellation
Share purchase options
Free share grants
Liquidity and market-making
External growth
Board of Directors’ Meeting at which buybacks were implemented
June 28, 2022
Number of shares purchased in 2022
30,000
Number of shares cancelled in 2022
0
Number of treasury shares at December 31, 2022
(a)
359,106
Percentage of capital held by the Company at December 31, 2021
5.9%
(a)
Excluding liquidity contract.
INFORMATION ON THE COMPANY AND SHARE CAPITAL
8
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183
CONTENTS
1
2
3
4
5
6
7
8
9
8.3.
ESI SHARES – MARKET
The chart below shows how ESI Group’s stock price has performed relative to the CAC Mid & Small and CAC 40 index since January 1, 2020
until the end of December 2022:
The chart below shows how ESI Group’s stock price has performed since its initial public offering on July 6, 2000 until the end of December
2022 and the daily volume of transactions:
8
INFORMATION ON THE COMPANY AND SHARE CAPITAL
ESI SHARES – MARKET
184
2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
ESI Group
CAC 40
CAC Mid & Small
Dec.-22
Nov.-22
July-22
May-22
Sept.-22
March-22
Jan.-22
July-21
May-21
Sept.-21
March-21
Jan.-21
July-20
May-20
Sept.-20
March-20
Jan.-20
Nov.-21
Nov.-20
0
50
100
150
200
250
300
(Base 100)
6,041.50
€32.0
13,647.16
6,473.76
13,365.03
€73.8
ESI Group stock price
(In euros)
(Number of shares)
Daily volume
€73.8
July
2000
July
2001
July
2002
July
2003
July
2004
July
2005
July
2006
July
2007
July
2008
July
2009
July
2010
July
2011
July
2012
July
2013
July
2014
July
2015
July
2016
July
2017
July
2018
July
2019
July
2020
July
2021
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
0
10
20
30
40
50
60
70
80
July
2022
€26.72
CONTENTS
9
ADDITIONAL
INFORMATION
9.1.
PERSONS RESPONSIBLE FOR THE UNIVERSAL
REGISTRATION DOCUMENT
186
9.1.1.
Person responsible for the information
contained in the Universal Registration Document
186
9.1.2.
Statement by the person responsible for the information
contained in the Universal Registration Document
186
9.1.3.
Person responsible for the financial information
186
9.2.
STATUTORY AUDITORS
186
9.3.
DOCUMENT AVAILABLE TO THE PUBLIC
187
9.4.
INFORMATION INCLUDED BY REFERENCE
187
CROSS-REFERENCE TABLES
188
REGULATORY TABLES
194
KEYWORDS OF THE 2022 UNIVERSAL
REGISTRATION DOCUMENT
200
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
185
CONTENTS
9.1.
PERSONS RESPONSIBLE FOR THE UNIVERSAL
REGISTRATION DOCUMENT
9.1.1. Person responsible for the information
contained in the Universal Registration Document
Mrs. Cristel de Rouvray, Chief Executive Officer of ESI Group.
9.1.2. Statement by the person responsible for the information
contained in the Universal Registration Document
Rungis, March 17, 2023.
Mrs. Cristel de Rouvray, Chief Executive Officer of ESI Group:
“I certify, that the information contained in this Universal Registration
Document are, to the best of my knowledge, in accordance with the facts
and does not include any omissions that might alter the contents
thereof.
I hereby certify that, to the best of my knowledge, the financial
statements have been prepared in accordance with applicable
accounting standards and give a true and fair view of the assets,
liabilities, financial position and results of the Company and all
consolidated companies making up the Group, and that the
management report included on the Universal Registration Document
presents a fair picture of the business trends, results and financial
position of the Company and all consolidated companies making up the
Group, as well as a description of the main risks and uncertainties these
entities face.”
9.1.3. Person responsible for the financial information
Mrs. Cristel de Rouvray, Chief Executive Officer of ESI Group.
9.2.
STATUTORY AUDITORS
Statutory Auditors
KPMG S.A.
Tour Eqho – 2, avenue Gambetta
92066 Paris-La Défense Cedex
Represented by Stéphanie Ortega.
Date of 1
st appointment: Combined General Meeting of June 22,
2021 for a term of six years.
Term of office: Annual General Meeting called to approve the
financial statements for the year ended December 31, 2026.
KPMG S.A. is a member of the Versailles & du Centre Regional
Association of Statutory Auditors.
Ernst & Young Audit
Tour First
TSA 14444
92037 Paris-La Défense cedex
Represented by Mr. Pierre-Henri Pagnon.
Date of last renewal: Combined General Meeting of June 22, 2021
for a term of six years.
Term of office: Annual General Meeting called to approve the
financial statements for the year ended December 31, 2026.
Ernst & Young Audit is a member of the Versailles & du Centre
Regional Association of Statutory Auditors.
9
ADDITIONAL INFORMATION
PERSONS RESPONSIBLE FOR THE UNIVERSAL REGISTRATION DOCUMENT
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
9.3.
DOCUMENT AVAILABLE TO THE PUBLIC
All corporate documents related to the Company can be consulted
on its website: www.esi-group.com. The website provides both in
French and English a detailed description of the Group and its
business activities, as well as financial information for shareholders
and investors, including all mandatory information required under
the European Transparency Directive. It provides access to
Universal Registration Documents, financial reports, annual and
interim consolidated financial statements, press releases, regulated
information, the articles of association, shareholders letters and
guides and stock prices.
Following the Transparency Directive adopted in 2007, ESI Group
has decided to use a reporting service licensed by the French
Financial Markets Authority (AMF). This allows the Group to provide
proof of compliance with legal reporting requirements.
Lastly, if you have any questions regarding this Universal Registration Document, please contact:
ESI Group – Communication Department
3 bis, rue Saarinen – Immeuble Le Séville
94528 Rungis Cedex
France
investors@esi-group.com
9.4.
INFORMATION INCLUDED BY REFERENCE
Pursuant to Article 19 of Regulation (EU) 2017/1129 of the
European Parliament and of the Council of June 14, 2017, the
following information is included by reference in this Universal
Registration Document:
■The financial information contained in the management report,
the consolidated financial statements and the corresponding
Statutory Auditors’ report, as well as the annual accounts and
the
corresponding
Statutory
Auditors’
report
appearing
respectively on pages 95 et seq., 102 et seq. and 142 et seq. of the
Universal Registration Document for fiscal year 2021 filed with
the AMF on April 11, 2022 under number D.22-0273;
■The financial information contained in the management report,
the consolidated accounts and the corresponding Auditors’
report, as well as the annual accounts and the corresponding
auditors’ report appearing respectively on pages 89 et seq., 96
et seq. and 132 et seq. of the 2020 registration document filed
with the AMF on April 16, 2021 under number D.21-0315; The
parts not included in the 2020 Registration Document and the
2021 Universal Registration Document are either irrelevant to
the investor or covered in another part of the 2022 Universal
Registration Document.
ADDITIONAL INFORMATION
9
INFORMATION INCLUDED BY REFERENCE
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
187
CONTENTS
1
2
3
4
5
6
7
8
9
CROSS-REFERENCE TABLES
Universal registration document cross-reference tables
These cross-reference tables include the headings provided in Appendices I and II of the Commission Delegated Regulation (EU) 2019/980 of
March 14, 2019 and refer to the pages of this Universal Registration Document where the information relating to each of these headings is
mentioned.
1. Persons responsible, third party information, expert reports and approval of the competent
authority
186
2. Statutory Auditors
186
3. Risk factors
53 et seq.
4. Information concerning the issuer
177
5. Business overview
6-12
5.1. Main activities
6-7
5.1.1. Description of operations carried out by the issuer and its principal business activities
6-7
5.1.2. Significant new products or services launched on the market
6-7
5.2. Main markets
7-8
5.3. Important events in the activities’ development
9-10
5.4. Strategy and objectives
10-12
5.5. Level of dependence of the issuer on patents or licenses, industrial, commercial or financial contracts or
new manufacturing processes
N/A
5.6. Competitive position
7-10
5.7. Investments
11-12
6. Flowchart
14
6.1. Brief description of the Group and the issuer’s position within the Group
4 & 14
6.2. List of significant subsidiaries
14, 113 & 151
7. Review of financial position and results
98 et seq.
7.1. Financial situation
98 et seq.
7.2. Operating income
98 et seq.
7.2.1. Major factors
98 et seq.
7.2.2. Reasons for major changes in net revenues or income
98 et seq.
7.2.3. Strategy or factor of a governmental, economic, budgetary, monetary nature or policy having
materially influenced or potentially influencing, directly or indirectly, on the issuer’s operations
53 et seq.
8. Cash flows and capital
8.1. Information on the issuer’s capital
106, 136
8.2. Source and amount of the issuer’s cash flows and descriptions of these cash flows
107
8.3. Information on the financing requirements
129 et seq.
8.4. Restriction on use of capital
N/A
8.5. Information concerning anticipated sources of funds
N/A
9. Regulatory Environment
20 et seq.
10. Information on business trends
102
11. Profit forecasts or estimates
N/A
12. Administrative, management and supervisory bodies and executive management
21 et seq.
12.1. Administrative and management bodies
21 to 28
12.2. Conflicts of interest within administrative, management and supervisory bodies
29
Information
Page(s)
9
ADDITIONAL INFORMATION
CROSS-REFERENCE TABLES
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2022 UNIVERSAL REGISTRATION DOCUMENT • ESI Group
CONTENTS
13. Compensation and benefits
36 et seq.
13.1. Compensation paid to corporate officers
36 to 47
13.2. Total amounts set aside or accrued to provide pension, retirement or similar benefits
36 to 47
14. Practices and procedures of the administrative and management bodies
21 et seq.
14.1. End date of current terms of office
23
14.2. Service agreements
23
14.3. Information on the Audit Committee and the Compensation Committee
33-35
14.4. Declaration of compliance with the corporate governance standards
20
14.5. Potential significant impacts on corporate governance
51
15. Headcount
69 et seq.
15.1. Number of employees
75
15.2. Profit-sharing and stock options
36 et seq.
15.3. Description of any employee profit-sharing agreements involving the issuer’s capital
36 et seq.
16. Key shareholders
180 et seq.
16.1. Threshold crossing
182
16.2. Different voting rights
181
16.3. Control of the Company
59 to 61
16.4. Description of any agreements, known to the Company, the performance of which may result in a change
in control of the Company at a later date
51
17. Related party transactions
138
18. Financial information concerning the issuer’s assets and liabilities, financial position
and performance
104 et seq.
18.1. Historical financial information
104 et seq.
18.2. Interim financial information and others
N/A
18.3. Auditing of historical annual financial information
133, 165 to 168
18.4. Proforma financial information
106 et seq.
18.5. Dividend payout policy
N/A
18.6. Legal and arbitration proceedings
178
18.7. Material changes in the financial position
N/A
19. Additional information
179 et seq.
19.1. Legal capital
179 et seq.
19.2. Instrument of incorporation and articles of association
50, 178-179
20. Key contracts
9-10
21. Documents available to the public
187
Information
Page(s)
ADDITIONAL INFORMATION
9
CROSS-REFERENCE TABLES
ESI Group • 2022 UNIVERSAL REGISTRATION DOCUMENT
189
CONTENTS
1
2
3
4
5
6
7
8
9
Annual financial report cross-reference table
For ease of reference, the following cross-reference table facilitates identification of information making up the annual financial report, the
publication of which is required under Article L. 451-1-2 of the French Financial and Monetary Code and Article 222-3 of French Financial
Markets Authority (AMF) General Regulations.
Informations
Page(s)
■Person responsible for the document
186
■Annual financial statements of ESI Group
143 et seq.
■Consolidated financial statements of ESI Group
104 et seq.
■Statutory Auditors’ report on the annual financial statements
165 et seq.
■Statutory Auditors’ report on the consolidated financial statements
139 et seq.
■Management report
See the next table
■Report of the Board of Directors on the corporate governance
See the next table
Management report cross-reference table
For ease of reference, the following cross-reference table facilitates identification of information required in the management report pursuant
to Articles L. 225-100 et seq., L. 22-10-35, L. 22-10-36, L. 232-1 and R. 225-102 et seq. of the French Commercial Code.
Informations
Page(s)
Group position and business
■Objective and exhaustive analysis of development of the Group’s business, performance and financial position
6-17
98 et seq.
■Key events between the closing date and the date of the management report
138 et seq.
■Description of main risks and uncertainties and indication
regarding the use of financial instruments by the Group
129 et seq.
■Foreseeable development of the Group’s situation and future outlook
102
■Research and development activity
12
Shareholding and share capital
179 et seq.
■Structure and development of the Group’s share capital
179-182
■Status of employee share ownership
180-182
■Acquisition and disposal of own shares by the Group
183
■Declarations of ownership thresholds crossed
182
■Shareholder agreements corresponding to securities comprising Company’s share capital
182
Environmental, social and societal information
63 et seq.
■Environmental information
84 to 88
■Social information
69 to 76
■Societal information
77 to 83
Other information
■Information regarding supplier payment terms
101
■Table summarizing the results of the past five financial years
102
Internal control and risk management procedures
54 et seq.
■Control environment
57-58
■Organization of internal control
59-60
■Risk management
60-61
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Corporate governance report cross-reference table
For ease of reference, the following cross-reference table facilitates identification of information required in the corporate governance report
pursuant to Articles L. 225-37 et seq., of the French Commercial Code.
Informations
Page(s)
■Executive management choices
21
■Limits on the powers of the Chief Executive Officer and Chief Operating Officers
21
■Composition of the Board of Directors, conditions for preparing and organizing the work of the Board
of Directors
22 et seq.
■List of all positions held in all companies by each corporate officer during the financial year
26 to 28
■Compensation and benefits paid during the financial year to each corporate officer
36 et seq.
■Report on the principles and criteria for attributing and distributing compensation payable to executive
corporate officers in respect of their term
36 et seq.
■Agreements signed between a Director or a major shareholder and a subsidiary
20
■Grant and conservation of stock options to corporate officers
42 et seq.
■Grant and conservation of free shares to corporate officers
42 et seq.
■Table summarizing currently valid delegations granted by the Shareholders’ Meeting
49
■Factors that may have an impact in the event of a public offering
51
ADDITIONAL INFORMATION
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2
3
4
5
6
7
8
9
Statement on extra-financial performance cross-reference table
For ease of reference, the following cross-reference table facilitates identification of environmental, social and societal information making up
the Statement on extra-financial performance, provided in accordance with Articles L. 225-102-1 and R. 225-105 of the French Commercial
Code.
SOCIAL INFORMATION
Employment
■Total workforce and breakdown by gender, age and geographic area
72 à 73
■Recruitments and dismissals
75
■Compensation and changes in compensation over time
76
Work organization
■Work schedules
75
■Absenteeism
N/A
Labor relations
■Organization of employer-employee dialogue
75
■Summary of collective agreements
75
Health and safety
■Workplace health and safety conditions
76
■Summary of agreements signed with trade unions or employee representatives regarding workplace health and safety
75
■Workplace accidents, in particular frequency and severity, as well as occupational illnesses
N/A
Training
■Training policies implemented
70
■Total number of training hours
70
Equal treatment
■Steps taken in support of gender equality
73-74
■Steps taken in support of employment and inclusion of people with disabilities
73
■Anti-discrimination policy
73
Promotion and observance of the fundamental conventions of the International Labor Organization
■Observance of freedom of assembly and the right to collective bargaining
N/A
■Elimination of discrimination in employment and occupation
72
■Elimination of forced or mandatory labor
81
■Effective elimination of child labor
81
SOCIETAL INFORMATION
Territorial, economic and social impact of the Company’s activity
■In terms of employment and regional development
69 à 71
■On neighboring or local communities
78 à 80
Relations with persons or organizations with an interest in the activity of the Company, including NGOs,
educational institutions and local communities
■Terms of dialog with such persons or organizations
79 à 81
Subcontracting and suppliers
■Consideration of social issues in the purchasing policy
N/A
■Consideration of environmental issues in the purchasing policy
N/A
■Amount of subcontracting and consideration of the social and environmental responsibility of suppliers and
subcontractors in relationships with them
77 à 82
Fair trade practices
■Actions taken to prevent corruption
82
■Measures promoting the health and safety of consumers
77 à 81
Page(s)
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ENVIRONMENTAL INFORMATION
Overall environmental policy
■Organization of the Company for the consideration of environmental issues and environmental evaluation or
certification processes, where applicable
84 et seq.
■Employee training and information on environmental protection
88
■Resources devoted to preventing environmental risks and pollution
84 et seq.
■Amount of provisions and guarantees for environmental risks
N/A
Pollution
■Prevention, reduction or remediation of discharges with serious environmental impact on the air, water or soil
84 et seq.
■Consideration of noise and any other form of pollution specific to an activity
84 et seq.
Circular economy
■Waste prevention and management:
• Prevention, recycling, reuse and other waste recovery and elimination measures
88
• Measures to fight food waste
N/A
■Sustainable use of resources:
• Water consumption and supply in relation to local constraints
88
• Consumption of raw materials and measures to enhance efficiency
N/A
• Energy consumption, measures to improve energy efficiency and use of renewable energies
85 to 88
• Land use
N/A
Climate change
■Significant factors of greenhouse gas emissions caused by the Company’s activity, particularly
through use of the goods and services produced by the Company
84 to 87
■Adapting to the impact of climate change
N/A
Protecting biodiversity
■Protecting biodiversity
N/A
Page(s)
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REGULATORY TABLES
Revenue regulatory table
Substantial contribution
Economic activities (1)
Code(s)
(2)
Total
revenue (3)
% Of
revenue (4)
Climate
change
mitigation
(5)
Climate
change
mitigation
(6)
Water and
marine
resources
(7)
Circular
economy
(8)
Pollution
(9)
Biodiversity
and
ecosystems
(10)
A.ACTIVITIES ELIGIBLE FOR THE TAXONOMY
A.1. Environmentally sustainable activities (aligned with the Taxonomy)
Revenue from environmentally
sustainable activities (aligned) (A.1.)
N/A
N/A
N/A
N/A
N/A
N/A
A.2. Activities eligible for the Taxonomy but not environmentally sustainable (non-aligned)
8.2 Data-driven solutions to reduce GHG
emissions
8.2
133,916,000
100%
N/A
N/A
N/A
N/A
N/A
N/A
Revenue from activities eligible for the
Taxonomy but not environmentally
sustainable (not aligned) (A.2.)
N/A
133,916,000
100%
TOTAL A (A.1. + A.2.)
N/A
133,916,000
100%
B. ACTIVITIES NOT ELIGIBLE FOR TAXONOMY
Revenue of activities not eligible for the
Taxonomy (B.)
N/A
0
0%
TOTAL (A + B)
N/A
133,916,000
100%
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DNSH
Proportion
of revenue
aligned in
year N
(18)
Proportion
of revenue
aligned in
year N-1
(19)
Category
(enabling
activity) (20))
Category
(transitional
activity) (21)
Climate
change
mitigation
(11)
Climate
change
adaptation
(12)
Aquatic and
marine
resources
(13)
Circular
economy
(14)
Pollution
(15)
Biodiversity
and
ecosystems
(16)
Minimum
guarantees
(17)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0 %
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
100 %
N/A
N/A
N/A
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CAPEX regulatory table
Substantial contribution
Economic activities (1)
Code(s)
(2)
Capital
expenditure
total (3)
% of capital
expenditure
(4)
Climate
change
mitigation
(5)
Climate
change
mitigation
(6)
Water and
marine
resources
(7)
Circular
economy
(8)
Pollution
(9)
Biodiversity
and
ecosystems
(10)
A.ACTIVITIES ELIGIBLE FOR THE TAXONOMY
A.1. Environmentally sustainable activities (aligned with the Taxonomy)
Capital expenditure on environmentally
sustainable activities (aligned) (A.1.)
0
0
0 %
N/A
N/A
N/A
N/A
N/A
N/A
A.2. Activities eligible for the Taxonomy but not environmentally sustainable (non-aligned)
6.5. Transport by motorcycles, passenger
cars and light commercial vehicles
6.5
639,506
33%
7.7 Acquisition and ownership of
buildings
7.7
19,584
1%
Capital expenditure of activities eligible
for the Taxonomy but not
environmentally sustainable (not aligned)
(A.2.)
N/A
659,090
34%
TOTAL A (A.1. + A.2.)
N/A
659,090
34%
B. ACTIVITIES NOT ELIGIBLE FOR TAXONOMY
Capital expenditure of activities not
eligible for Taxonomy (B.)
N/A
1,254,513
66%
TOTAL (A + B)
N/A
1,913,603
100%
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DNSH
Proportion of
capital
expenditure
aligned in
year N (18)
Proportion
of capital
expenditure
aligned in
year N-1 (19)
Category
(enabling
activity) (20))
Category
(transitional
activity) (21)
Climate
change
mitigation
(11)
Climate
change
adaptation
(12)
Aquatic and
marine
resources
(13)
Circular
economy
(14)
Pollution
(15)
Biodiversity
and
ecosystems
(16)
Minimum
guarantees
(17)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0 %
N/A
N/A
N/A
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OPEX regulatory table
Substantial contribution
Economic activities (1)
Code(s)
(2)
Operating
expenses
total (3)
% of
operating
expenses (4)
Climate
change
mitigation
(5)
Climate
change
mitigation
(6)
Water and
marine
resources
(7)
Circular
economy
(8)
Pollution
(9)
Biodiversity
and
ecosystems
(10)
A.ACTIVITIES ELIGIBLE FOR THE TAXONOMY
A.1. Environmentally sustainable activities (aligned with the Taxonomy)
Operating expenses for environmentally
sustainable operations (aligned) (A.1.)
N/A
0 €
0%
N/A
N/A
N/A
N/A
N/A
N/A
A.2. Activities eligible for the Taxonomy but not environmentally sustainable (non-aligned)
7.7 Acquisition and ownership of
buildings
7.7
1,219,722
0.1%
8.1. Data processing and hosting and
related activities
8.1
310,300
0.3%
8.2 Data-driven solutions for
reduce GHG emissions
8.2
34,068,000
28.3%
Operating expenses of activities eligible
for the Taxonomy but not
environmentally sustainable (not
aligned) (A.2.)
N/A
35,598,022
29.6%
TOTAL A (A.1. + A.2.)
N/A
35,598,022
29.6%
B. ACTIVITIES NOT ELIGIBLE FOR TAXONOMY
Operating expenses of activities not
eligible for the Taxonomy (B.)
N/A
84,681,978
74.4%
TOTAL (A. + B.)
N/A
120,280,000
100%
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DNSH
Proportion of
operating
expenses
aligned in
year N
(18)
Proportion of
operating
expenses
aligned in
year N-1 (19)
Category
(enabling
activity) (20))
Category
(transitional
activity) (21)
Climate
change
mitigation
(11)
Climate
change
adaptation
(12)
Aquatic and
marine
resources
(13)
Circular
economy
(14)
Pollution
(15)
Biodiversity
and
ecosystems
(16)
Minimum
guarantees
(17)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0 %
N/A
N/A
N/A
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9
KEYWORDS OF THE 2022 UNIVERSAL
REGISTRATION DOCUMENT
Keywords
Page(s)
Aerospace
6-9, 116
Automotive & land transportation
6-9, 80, 108
Board of Directors
22 et seq.
Business model
138, 165
Capital
180 et seq.
Consolidated financial statements
104 et seq.
Corporate Social Responsibility (CSR)
64 et seq.
Crash-test
7, 11
Customers
2,3, 6-13, 20, 25, 54-65
Digital risk
55
Digital simulation
11, 78, 178
Distribution networks
6
Diversity
20, 66, 70-89
Ecosystem
9-10, 66-80
Employees
65 to 68
Energy
87 et seq.
Environment
88 et seq.
Environmental risks
54
Ethics Charter
82
Financial results
3, 104 et seq.
Financial risks
10
Gaïa Index
70
Governance
19 et seq., 82, 96
Human Resources
58
Hybrid Twin
7-9, 80, 98
Industrial
5 to 10, 56-84, 112
Industrial sectors
8
Innovation
3, 10-12, 55, 64, 77-80, 112,
125, 145
Innovative solutions
11
Intellectual Property
3, 6, 8, 55, 100
Keywords
Page(s)
Investment
9, 91-92, 99, 107
Investors
8-12, 56, 78, 89 et seq.
ISO 27001
79
ISO 9001
80
Leadership Team (“ELT”)
22
Licenses
60
Life cycle
5, 64
Maintenance
6-15, 77-79, 104 et seq.
Manufacturing
4 to 9, 86
Manufacturing industries
9-10
OneESI 2024
3 et seq.
Operational performance
77
Operating results
104 et seq.
Outcomes
60
Physical tests
3, 11
Product Lifecycle Management (PLM)
11
Product Performance Simulation
11
Quality
6-13, 57-58
R&D
8, 59, 100, 104 et seq.
Sales
2, 7, 10, 15, 98,
100-148
Services
7
Smart Manufacturing
11, 54
Software
3-15, 55, 64, 76, 99
Strategic and operational risks
54
Strategy
6 et seq.
Suppliers
7-10, 68, 80, 99-157
Sustainability
65 et seq.
Threshold crossing
182
Value creation
64
Virtual Prototyping
2, 64, 77, 108
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Investor Relations
Corinne Romefort-Régnier and Florence Barré
3 bis, rue Saarinen – Immeuble Le Séville – 94150 Rungis – France
Phone: +33 (0)1 49 78 28 28
investors@esi-group.com
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