Paris, 21^st May 2007: ESI Group (ISIN FR0004110310), a pioneer and world-leading solution provider in virtual prototyping and manufacturing processes, today announced its consolidated annual results for its FY to 31^st January 2007.

Consolidated data – IFRS

FY to 31^st January

• Licence sales: +11.2% in volume terms

As announced on 13^th March 2007, 2006/07 annual sales totalled 66 million euros, up +6.2% on the previous year and +7.6% at constant exchange rates. This increase in sales without any perimeter effect is a combination of a -5.6% withdrawal in Services activity and a significant acceleration in the growth of Licence sales, which were up +11.2% in volume terms in 2006/07 versus +7.0% in 2005/06.

• Operating margin: 8.5%

The weakness of Services activity slowed growth in the overall gross margin to +4.5%.

As a result of a positive accounting impact of the adjustment of R&D amortization costs to coincide with the launch of new solutions (IFRS), of the fall in the average labour cost despite a significant strengthening of the workforce in China, India and Korea, and of the stability of G&A costs, our cost structure recorded a limited increase of +1.3%. Consequently, the operating profit totalled 5.62 million euros, significantly up by +36.6%, giving an operating margin of 8.5% compared to 6.6% a year earlier.

Affected by essentially latent foreign exchange losses associated with the negative currency trend (dollar, yen and won), there was a financial loss of 1.59 million euros, curtailing the Group’s net profitability. The 2006/07 net margin was 3.7%, with a net profit of 2.44 million euros.

• Key points and recent events
• Significant growth in Licence activity. This good performance illustrates the efficiency of the growth relays contributed by our emerging and innovative products, as well as the solidity of the Company’s highly-recurrent business model.
• Temporary fall in Services activity, essentially in Asia, despite buoyant activity from large OEMs and Tier 1 suppliers within the automotive sector. This activity should improve under the effect of the commercialisation of a high value-added structured offer and the promising start for co-financed innovative projects.
• Control of the cost structure in a context of ongoing investment that resulted in the strengthening of R&D teams, essentially in , and the deployment of customer support teams in Asia. The increase in the average workforce in 2006/07, which totalled 622 employees over the period, was essentially due to the development of the Asia area.
• Negative impact of exchange rates on the Group’s net profitability in 2006 and increase, from February 2007, of currency hedging operations on both cash flows and balance sheet positions.
• Available Cash position of 9.7 million euros at the end of FY 2006/07, versus 14.3 million euros at the end of FY 2005/06. This evolution can notably be explained by the earn out payments associated with the aggressive external growth strategy carried out over previous years, as well as by the financing of the set up of new activities in Asia and a temporary effect on account receivables.
• Maintenance of a sound financial structure with low indebtedness ratio (long-term financial debt over shareholders equity) of 7.74% at 31^st January 2007 versus 11.36% at the end of the previous FY.  Moreover, the Company has finalised the negotiation of a syndicated loan of 19 million euros, with a credit line of 12.4 million euros over 24 months and the equivalent of 6.6 million euros in USD within the framework of a 5-year refinancing. This operation will enable the Group to maintain high financial flexibility in order to continue its development whilst smoothing out the weight of current debt.

Alain de Rouvray, the ESI Group’s Chairman and CEO, concludes: “The full-year performance was generally satisfactory, sustained by sales from our main activity that is Licences, although it was contrasted in view of Services activity and the moderate growth of mature products currently migrating towards 2G solutions. However, FY 2006 enabled major advances to be made, such as the proven efficiency of our growth relays contributed by emerging and innovative products and further validation of the pertinence of our positioning in Asia, and particularly in . Furthermore, significant measures have been set up since the start of the year such as the negotiation of a further syndicated loan, whilst the management team has been strengthened at both Sales & Marketing level (VP S&M) and at support function level (HR, administration and finance departments) in order to accelerate integration synergies at global level, following-up the creation of the software Development global position (VP R&D) of the previous year. FY 2007 should see further growth through the consolidation of products and 2G integrated solutions and an upturn in Services activity while the improvement in profitability should continue due to the ongoing control of our cost structure.”

About ESI Group

A virtual test software package publisher, ESI Group is the world-leading supplier, and a pioneer of digital simulation software for prototyping and manufacturing processes that take into account the physics of materials. ESI Group has developed an extensive suite of coherent, industry oriented applications to realistically simulate a product’s behaviour during testing, to fine-tune manufacturing processes in accordance with desired product performance, and evaluate the environment’s impact on product performance. ESI Group’s products, which have a proven track record in manufacturing and have been combined in multi-trade value chains, represent a unique collaborative and open virtual engineering solution known as the Virtual Try-Out Space (VTOS), enabling virtual prototypes to be improved in a continuous and collaborative manner. This integrated communication protocol will enable all the company’s solutions to work with each other and with applications developed by independent software vendors. By significantly reducing costs and development lead times and enabling product/process synergies, VTOS solutions offer major competitive advantage by progressively eliminating the need for physical prototypes during product development. The company generated sales of €66m in 2006, employs over 600 high-level specialists worldwide covering more than 30 countries. ESI Group is listed in Eurolist compartment C of Euronext Paris. For further information, visit www.esi-group.com.

ESI GROUP has been qualified as “an innovative company” since January 20 2000 by the ANVAR and is eligible for inclusion in “FCPI” (venture capital trusts dedicated to innovation).

Listed in Eurolist compartment C of Euronext Paris

ISIN FR 0004110310 - FTSE 977- Bloomberg ESI FP - Reuters ESIG.LN

Sales for the first quarter of 2007 will be published on 12th June 2007   (after market)

Virtual Try-Out Space® and VTOS® are registered trademarks of ESI Group. All other products, names or companies are the brands or registered trademarks of their respective owners.