Barco 2Q04 sales increase 8.6%, EBITA up 7.3%
Second Quarter 2004 Financial Highlights :
· Sales at euro 171.5 million, above management’s expectations of euro 160-170 million, and 8.6% up year on year. At constant exchange rates, sales increased 11.5%.
· EBITA up 7.3%, to euro 18.7 million, within the range anticipated by management. EBITA margin at 10.9% compared with 11% in 2Q03.
· Net income at euro 12.7 million, up 11.6% from 2Q03.
· Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense divided by the average number of shares outstanding) were at euro 1.19 versus 1.05 the year before.
· Net earnings per share of euro 1.03, compared with euro 0.92 in 2Q03.
· Fully diluted earnings per share of euro 0.97, from euro 0.86 in the same period last year.
Kortrijk, Belgium, July 27, 2004 – Barco n.v. (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three- and six-month periods ended June 30, 2004.
Barco CEO, Martin De Prycker, commented: “This quarter we exceeded our sales expectations and saw growth in all divisions, with the exception of BarcoVision and met our EBITA target in the middle of the range. Excluding currency fluctuations, EBITA would have increased by 11.5%. Looking at the first half of the year in review, sales and EBITA increased by 3.8%, while the EBITA margin remained stable at 10.6%.”
Regarding the outlook for the year, Mr. De Prycker, said: “The order book continued to grow during the second quarter, which is definitely a positive sign for the remainder of the year. As a result, we are expecting sales for the third quarter to range between euro 150 to 160 million, while EBITA is anticipated in the range of euro 10 to 15 million. Assuming growth at the middle of these ranges, sales would increase year on year by 7% and EBITA by 25%.”
“In addition, US acquisitions made over the last 18 months and our joint venture in China are steadily increasing our natural hedging position versus the US dollar and related currencies, reducing our vulnerability for currency fluctuations.”
CONSOLIDATED RESULTS FOR THE QUARTER
Sales
Sales for the quarter increased by 8.6% year on year to euro 171.5 million, roughly in line with management’s expectations of euro 160-170 million for the quarter. Except for BarcoVision that saw a decline of 16%, sales increased at all divisions: +5.4% at BarcoView, +15% at Presentation & Simulation, +33.7% at Control Rooms and +40.2% at Media & Entertainment. Sales of Machine Vision and dotrix, both divested in 2003, were still included in total sales for 2Q03.
If the US dollar exchange rate had remained unchanged year on year, sales would have grown by 11.5%.
Sales to Europe, Middle East and Africa represented 48% of consolidated sales, while 32% of sales were realized in the Americas and 20% in Asia Pacific.
Orders increased by 5.6% to euro 178.6 million, from euro 169.2 million in the year ago period. Excluding the impact of the devaluation of the US dollar against the euro, orders would have risen by 8.6%.
The book-to-bill ratio was 1.04, compared with 1.07 for 2Q03 and 1.03 for 1Q04.
Book-to-Bill Ratio 
Gross Profit & Margin
Gross profit increased 6.7% to euro 75.7 million from euro 71 million in 2Q03. Gross margin, on a sequential basis, remained relatively stable at 44.1%. Year on year, gross margin declined slightly from 44.9%, due to higher indirect manufacturing costs, a changing product mix and pricing pressure in certain markets.
Operating Results before Amortization of Consolidation Goodwill (EBITA)
Operating results before amortization of consolidation goodwill (EBITA) increased by 7.3%, to euro 18.7 million, or 10.9% of sales. This compares to euro 17.4 million, or 11% of sales for 2Q03. Without currency fluctuations EBITA would have been euro 0.7 million higher.
General & administration expenses as a percentage of sales remained relatively unchanged year on year at 7.3%. Sales and marketing costs also remained unchanged at 16.2% of sales. Research and development expenses however, decreased to 9.7% from 11.4% of sales in the same quarter of the previous year.
Income Taxes
Income taxes decreased from euro 4.9 million to euro 4.6 million year on year.
Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense divided by the weighted average number of shares outstanding) for the quarter were at euro 1.19 versus euro 1.05 the year before.
Net Income
Net income for the quarter improved year on year by 11.6% to euro 12.7 million, or a net margin of 7.4%, from euro 11.4 million for 2Q03. On a sequential basis, net income improved by 25.9% from euro 10.1 million in 1Q04, or a 6.8% net income margin.
Net earnings per ordinary share (EPS) for the quarter improved to euro 1.03 from euro 0.92 in 2Q03, and euro 0.81 in 1Q04. Fully diluted net earnings per share was euro 0.97, compared to euro 0.86 in the year ago period.
Capital Expenditures (CAPEX)
Capex for the quarter was euro 5.3 million, including the construction and expansion of buildings. For the full year 2004, management expects to invest approximately euro 35 million.
CONSOLIDATED RESULTS FOR THE SIX MONTHS
Sales
Sales increased by 3.8% year on year to euro 320.8 million. This was primarily the result of sales growth of 35.3% and 55% at Barco Control Rooms and Barco Media & Entertainment, respectively. BarcoView’s sales remained relatively stable while sales at Barco Presentation & Simulation decreased by 2.1%. Sales at BarcoVision, excluding Machine Vision, which was divested in July 2003, declined 21.8%, reflecting the continued low of the textile cycle. Also dotrix, which was sold to Agfa Gevaert at the end of 2003, was still included in the consolidated sales of 1H03.
At constant exchange rates, consolidated sales for the first half of the year would have risen by 8.3% year on year.
Gross Profit & Margin
Gross profit increased by 2.9% year on year to euro 141.6 million, from euro 137.6 million. Gross margin decreased from 44.5% to 44.1%, reflecting higher indirect manufacturing costs, a changing product mix and pricing pressures in certain markets.
Operating Results before Amortization of Consolidation Goodwill (EBITA)
Operating results before amortization of consolidation goodwill increased by 3.8% year on year to euro 34.1 million. EBITA margin remained stable at 10.6% of sales.
General & administration expenses, as a percentage of sales, declined from 7.7% in 1H03 to 7.4%. Research & Development expenses decreased to 10.1% of sales from 11.2% in 1H03. Sales & marketing costs however, increased from 16.2% to 16.7% of sales in 1H04, as Barco is preparing for future growth.
Other operating income decreased from euro 3.6 million to euro 2.1 million.
Income Taxes
Income taxes decreased year on year to euro 8.5 million from euro 9.2 million.
Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense divided by the weighted average number of shares outstanding) increased to 2.24 versus euro 1.98 for 1H03.
Net Income
Net income improved year on year to euro 22.8 million, from euro 21.2 million in the same period of 2003, an increase of 7.5 %. Net earnings per ordinary share (EPS) improved to euro 1.95 from euro 1.70 for the first half of 2003. Fully diluted net earnings per share for the first half of the year was euro 1.83 compared with euro 1.61 in the year ago period.
OUTLOOK FOR 3Q04
Management expects sales for 3Q04 to range between euro 150 and 160 million. Assuming sales at the middle of the range, this represents a 7% year on year growth.
Management expects EBITA in the range of euro 10 to 15 million. Assuming EBITA growth at the middle of the range, this represents an increase of 25%.
Current earnings per share are expected to range between euro 0.63 and euro 0.94.
DIVISIONAL RESULTS FOR THE QUARTER
BarcoView
Sales at BarcoView rose 5.4% year on year, with continued strong sales growth to the Medical market reaffirming Barco’s market leadership. Deliveries in Defense & Security were slightly lower than the year before, but shipments in Traffic management increased thanks to improved LCD supply.
The book-to-bill ratio for BarcoView for the quarter was at 1.1 with orders in Defense & Security better than in 2Q03. Orders remained at high levels in Medical and strong and comparable with those of last year in Traffic Management,
Sequentially, the gross profit margin increased to 47.4%, resulting in EBITA margin improving to 13.6 %, from 13.2% in 1Q04. In 2Q03, gross profit margin and EBITA were 46.4% and 14.6%, respectively.
Several new products were introduced during the quarter, including an LCD panel for mammography and the On Board Information Terminal for the Airbus A380.
Barco Media & Entertainment
Sales and order growth for the quarter are a clear indication of the positive impact on the Company’s results of the U.S. acquisitions made over the last 18 months and the Chinese joint venture set up in 2003.
Sales increased 40.2% year on year, driven by strong growth in the Media and Events markets. Sales in the Events market were also positively impacted by the 2004 Euro Soccer Championship and the 2004 Olympic Games. Digital Cinema sales grew considerably compared with 2Q03.
The book-to-bill ratio for the division increased to 1.02 from 0.88 in 1Q04. Orders for Media were strong, particularly in China and first successes were booked in the North American sports market, especially in the NBA. Events, including Folsom, saw an important year on year increase in orders worldwide. Prospects for strong growth in Digital Cinema towards the beginning of 2005 remain positive, with orders coming from Europe, North America and Asia.
Gross profit margin remained stable at 37.9% sequentially, but improved versus 2Q03. EBITA margin increased to 6.5% in 2Q04 from 5.5% in 1Q04 and 5.7% in 2Q03, as a result of the strong performance in Events. Ongoing investments in R&D, Sales & Marketing and in Operations will allow Barco to further improve the overall profit margin for this division.
The second quarter saw the introduction of the SLM R12 projector and the “Encore” controller for the Events market. In Media, the SLite 22 was introduced.
Barco Presentation & Simulation
Sales for the division increased 15% year on year, with stable sales in the Presentation market and a stronger performance in Security, Museums and Planetariums.
Order intake grew 21%, but remained below sales with a book-to-bill ratio of 0.96. Orders were notably strong in Virtual Reality and Simulation.
Gross profit margin at 48.2% was above the 46% for 1Q04, but weaker than
2Q03, due to lower margins in the Presentation market. EBITA margin more than doubled to 12.8% from 5.7% in 1Q04.
For the Presentation market, a new high resolution projector with HD format was introduced at the Infocomm show in Atlanta last June. The company expects that this new product will improve its position in the top end of the Presentation market.
Barco Control Rooms
In 2Q04 sales grew by 33.7% year on year, driven by sales growth in all of its markets. In particular, Traffic & Surveillance, which posted a strong performance during the quarter, reflecting Barco’s growing presence in the US and European Control Rooms market for Security applications.
Backlog continued to increase year on year, as a result of continued strong worldwide growth in orders. Book-to-bill was very high at 1.15.
At 50.5% gross profit margin was slightly better year on year and better than the 47% in 1Q04. EBITA margin rose to 14.4% from 10.7% in 1Q04.
BarcoVision
Sales at BarcoVision, excluding the divestiture of Machine Vision in July 2003, declined 15.7%.
The low book-to-bill ratio confirms the ongoing weakness of the textile market. However, orders have picked up in July, reflecting Barco’s differentiating new products such as PP (polypropylene) sensors and the Cyclops automatic inspection system for more complex fabrics.
Gross profit margin increased to 45.7% from 43.7% in 1Q04 and 44.8% in 2Q03. EBITA margin at 10.0% was lower than usual in BarcoVision, due to the decline in sales volumes, which was partially offset by efficient cost controls.
SHARE BUY-BACK PROGRAM
As approved at the Extraordinary General Shareholders’ meeting held on 1 June, 2004, Barco has established a share buy-back program to offset the dilution caused by its share option programs and acquisitions. At 30 June, 2004, Barco had bought back 119,600 shares for a total of euro 8.2 million in 2004. In 2003 Barco had already bought back 95,928 of its shares for a total of euro 5.0 million.
CONFERENCE CALL
Barco will hold a conference call with investors and analysts on July 27, 2004, starting at 4.30 p.m. Brussels Time (10.30 a.m. EST), to discuss the results for the quarter. The call will be hosted by the Company’s CEO, Mr. Martin De Prycker, Mr. Antoon Van Petegem, Chief Financial Officer and J.P. Tanghe, President Corporate Communication and Investor Relations.
An audiocast of this conference call will be available on the Company’s website www.barco.com at 7.30 p.m. Brussels time (1.30 p.m. EST).
ABOUT BARCO
Barco is an international imaging technology company headquartered in Kortrijk, Belgium, with a network of subsidiaries, distributors and agents in almost 100 countries. Barco provides visualization and display solutions for professional markets. Barco designs and develops solutions for large screen visualization, display solutions for life-critical applications, and systems for visual inspection. For fiscal year 2003, Barco posted net sales of euro 628.9 million, with EBITA margin of 11%.
Barco’s ordinary shares are listed on the Brussels/Euronext stock exchange. Share information may be accessed on Bloomberg under the symbol BAR BB and on Reuters under BARBt.BR. Barco is a BEL 20 and a Next 150 company.
For more information and the full report “6 months ending June 30, 2004”, please visit the Company’s website at www.barco.com
LIMITED REVIEW REPORT OF THE STATUTORY AUDITOR ON THE SEMI-ANNUAL CONSOLIDATED FINANCIAL INFORMATION OF BARCO NV AS OF JUNE 30, 2004 AND FOR THE SIX-MONTH PERIOD THEN ENDED
(Free translation)
We performed a limited review of the semi-annual consolidated financial information of Barco NV as of June 30, 2004 with a balance sheet total of EUR 671.546 thousand and a share of the group in the profit for the period of EUR 22.731 thousand. The semi-annual consolidated financial information has been prepared in accordance with International Financial Reporting Standards.
We conducted our review in accordance with the relevant recommendations of the ‘Instituut der Bedrijfsrevisoren’ (Belgian Institute of Auditors). This review consisted primarily of the analysis, comparison and discussion of the financial information and consequently was less extensive than a full scope audit of the consolidated financial information.
Our review has not revealed any information that would lead to any material modifications to the semi-annual consolidated financial information.
Kortrijk, July 26, 2004
Ernst & Young Bedrijfsrevisoren BCV (B160)
Statutory auditor
represented by
Marc Van Hoecke Ludo Swolfs
Partner Partner
For more information, please contact
