Barco proposes to increase dividend to euro 2.10 per share as net earnings per share 2004 grow by 3.2%
Fiscal year 2004 Financial Highlights:
•Sales at euro 671.9 million, a 6.8% year-over-year increase. At constant exchange rates, sales would have increased by 12%.
•EBITA margin went slightly down to 10.7%, from 11% in 2003. EBITA was euro 71.8 million, a 4% year-over-year increase.
•Total negative impact of currency fluctuations in EBITA was euro 4 million.
•Net income up 2.4% to euro 47.7 million, from euro 46.6 million.
•Current earnings per share of euro 4.69 versus euro 4.42 in 2003.
•Net earnings per share increased to euro 3.89, from euro 3.77.
•Fully diluted earnings per share up to euro 3.65, from euro 3.54 the prior year.
Barco CEO, Martin De Prycker, commented: “In 2004 sales grew by almost 7%, despite the ongoing depreciation of the US dollar and related currencies versus the euro. Without currency fluctuations sales would have grown 12%. Orders on the other hand decreased by 1%; excluding currency fluctuations, orders would have grown by 3%. Some orders have shifted to 2005. EBITA increased by 4% compared to 2003. For the full year the impact of total negative currency fluctuations in EBITA accounts for more than euro 4 million after the effect of financial hedging.”
“In 2004 we divested our Home Theater activity, in this way focusing fully on nothing but professional markets. We strengthened our activities in the medical market through the acquisition of Voxar, a leading 3D medical software company from Edinburgh, Scotland. This acquisition will accelerate our growth in the medical market. The acquisition of Folsom Research in January 2004 has contributed to the important growth realized in the Events market. The 2003 acquisitions in the media market together with increased manufacturing of LED walls in China led to an even stronger growth in this market. However, strong competition and investments in new products and plants still resulted in a loss in the media market over 2004. The sales growth ratios in North America and Asia of respectively 5.3% and 22.4%, illustrate how the strengthening of our sales and marketing efforts in these regions with strongly growing economies, have paid off. In local currencies, sales grew by 14% in North America, 6% of which was organic growth, while in Asia sales increased 32%.”
“Due to internal reshuffling of processes and longer lead times of suppliers, inventory was euro 40 million higher end 2004 compared to end 2003. The current inventory level corresponds to more than 5 months. Our goal is to substantially reduce inventory by end 2005. Compared to the end of 3Q04 inventory went down euro 13 million.”
“In 2005 we expect considerable absolute growth through internal and external investments in the medical, events, media and surveillance & security markets. Considerable attention will be paid to increasing the profitability in all business units by improving internal processes and quality. We will further step up our manufacturing in China.”
“For the first quarter of 2005 we expect orders to grow around 10% compared to 1Q04, to approximately euro 170 million. We anticipate sales for the quarter to range between euro 150 and 160 million. This means a year-over-year growth on average of more than 6% at constant exchange rates. We further expect to achieve EBITA in the range of euro 5 to 10 million, assuming the value of the US dollar and related currencies does not further weaken relative to the euro,” Mr De Prycker concluded.
CONSOLIDATED RESULTS FOR FISCAL YEAR 2004
Sales and Orders
Sales grew 6.8% to euro 671.9 million. This increase was realized to a large extent by the growth in sales in the Control Rooms and the Media & Entertainment divisions by respectively 32% and 31.4%. Presentation & Simulation grew by 3.1% and BarcoView increased its sales with 4%. BarcoVision saw a decrease of 11% (after the exclusion of Machine Vision, divested in July 2003).
Excluding currency fluctuations, sales would have increased 12%.
Orders decreased by 1.4% in 2004 compared to 2003. This decrease was brought about by the 14% decline in orders in 4Q04 versus 4Q03, due to the shifting of some orders to 2005 and the quite exceptional order in-take in 4Q03. Excluding currency fluctuations orders would have grown by 3%. The decline in orders by 7.9% in BarcoVision (after the exclusion of Machine Vision, divested in July 2003) and by 5.1% in Presentation & Simulation was offset in particular by the growth in orders with 18.3% at Media & Entertainment. BarcoView saw its orders grow 2.4% and Control Rooms 2%. The book-to-bill over 2004 was 0.97 versus 1.05 in 2003.
Gross Profit & Margin
Gross profit increased 4% year-on-year to euro 290.1 million, from euro 277.9 million. Gross margin declined by 1% to 43.2% during the same period.
Operating Results Before Interest, Taxes and Amortization of Consolidation Goodwill (EBITA)
EBITA increased by 3.9% to euro 71.8 million, from euro 69.1 million in 2003. Excluding currency fluctuations, EBITA would have improved to approximately euro 75.8 million.
EBITA margin was at 10.7% from 11% a year ago.
With 7.2% of sales, General and administration expenses remained relatively stable. In absolute value this was also the case for investment in research & development. Sales and marketing investments however, saw a substantial increase of 9% in absolute figures. This allowed Barco to grow our sales in the USA and in Asia by 14% and 32% respectively.
Other non-operating expense
Other non-operating expense was euro -0.2 million compared to euro -8.4 million in 2003. In 2003 it consisted of loss on loans to and participation in Esko-Graphics, partially compensated by a profit on the divestment of dotrix.
Income Taxes
Income taxes increased to euro 14.7 million from euro 6.7 million year on year. In 2003 there was a tax saving of approximately euro 8.7 million, resulting from exceptional losses from the exit of Esko-Graphics.
Current Earnings per Share
Current earnings (earnings before provisions for restructuring, non-operating income, goodwill amortization and tax impact related to the above) per share for the year were at euro 4.69 compared with euro 4.42 in 2003.
Net Income
Net income improved to euro 47.7 million, from euro 46.6 million in 2003. Net earnings per ordinary share (EPS) increased to euro 3.89, from euro 3.77. Fully diluted net earnings per share were euro 3.65, compared with euro 3.54 in the prior year.
Capital Expenditures (CAPEX)
Tangible capex for the year was euro 23.3 million.
OUTLOOK FOR 1Q05
The following statements are forward looking and actual results may differ materially.
For the first quarter of 2005, Barco expects orders at euro 170 million, a growth of more than 10% versus 1Q04, and sales of between euro 150 and 160 million, or on average 6% year-on-year growth at constant exchange rates.
Assuming the value of the US dollar and related currencies does not further weaken relative to the euro, the company expects to achieve EBITA in the range of euro 5 -10 million.
DIVIDEND POLICY
An increase in the dividend, to euro 2.10 per share, from euro 2.0 per share last year will be proposed by the Board of Directors at the Ordinary Shareholders’ meeting to take place on May 4, 2005. This would bring the pay-out ratio to 54%.
CONSOLIDATED RESULTS FOR THE QUARTER
Fourth Quarter 2004 Financial Highlights :
• Sales at euro 193.0 million, slightly above management’s expectations of euro 182-192 million, a 10.5% year-over-year increase.
• EBITA margin decreased to 12.6%, from 15.0% in 4Q03. EBITA was euro 24.3 million, a 7% year-over-year decline.
• Total negative impact of currency fluctuations in EBITA was euro 2 million.
• Net income down 13.8% to euro 16.1 million, from euro 18.7 million.
• Current earnings per share of euro 1.66 versus euro 1.83.
• Net earnings per share decreased to euro 1.32, from euro 1.52 in 4Q03.
• Fully diluted earnings per share down to euro 1.24, from euro 1.42 the prior year.
Sales and Orders
Sales for the quarter were euro 193.0 million, slightly above management’s expectations of euro 182-192 million, and 10.5% year-on-year increase. All divisions saw their sales grow; with 23% Control Rooms showed the highest growth, followed by BarcoVision with 19%. The View division increased its sales with 15%, Media & Entertainment with 9% and Presentation & Simulation with 6%.
At a constant US dollar exchange rate, sales would have grown by 15% year on year.
Sales to Europe, Middle East and Africa represented 49.9% of consolidated sales, while 31.4% of sales were realized in the Americas and 18.7% in Asia Pacific.
Some orders shifted to early 2005. For 4Q04 orders were euro 161.8 million, a decrease of 14% in nominal terms but only 11% excluding the impact of the 9.1% decrease in the US dollar and related currencies against the euro.
The book-to-bill ratio (orders divided by sales) was 0.84, compared with 1.08 for 4Q03. A book-to-bill ratio lower than 1 for the fourth quarter is not unusual because of the seasonal effect in sales that is typical for Barco: sales are high in the fourth quarter while they are low in the first. This is also illustrated by the book-to-bill ratio for 4Q02, which was at 0.82.
Book-to-Bill Ratio
Gross Profit & Margin
Gross profit increased year-on-year by 5% to euro 82.6 million. Gross profit margin was 42.9% compared with 45.0% in the year-ago quarter. The gross margin was under pressure as the decline of the US dollar resulted in 4Q sales at lower margins due to USD-based competition. Furthermore, also inventory had to be re-evaluated at a lower USD rate. On a sequential basis, gross margin improved by 1.3%, from 41.6% in 3Q03, due to the higher sales volume.
Operating Results before Interest, Tax and Amortization of Consolidation Goodwill (EBITA)
EBITA decreased 7% year on year to euro 24.3 million, at the lower part of expectations of euro 24-29 million, as profitability in USD-based countries was impacted by the further decrease of the US dollar and related currencies versus the euro. Excluding currency fluctuations, EBITA would have been euro 2.2 million higher.
EBITA margin decreased to 12.6% from 15% in 4Q03, following the lower gross profit margin of 42.9%.
General & administration expenses as a percentage of sales increased year on year from 5.8% to 6.3%. Sales and marketing spending and research & development expenses remained approximately at the same levels as the year before, with respectively 14.9% versus 14.8% and 9.2% versus 9.5%.
Other non-operating expense
Other non-operating income of euro -0.1 million represents the result on divestments. 4Q03 other non-operating expense of euro -9.1 million consisted of loss on loans to and participation in Esko-Graphics, partially compensated by a profit on the divestment of dotrix.
Income Taxes
Taxes were close to euro 3.6 million compared to a tax income of euro 5.3 million in 4Q03. This 4Q03 tax income resulted from the booking of the losses from the exit of Esko-Graphics.
Current earnings per share
Current earnings (earnings before provisions for restructuring, non-operating income, goodwill amortization and tax impact related to the above) per share for the quarter decreased to euro 1.66 from euro 1.83 for 4Q03.
Net Income
Net income for the quarter decreased by 13.8% to euro 16.1 million from euro 18.7 million for 4Q03. Net margin for the quarter was 8.4% from 10.7% the year before.
Net earnings per ordinary share (EPS) were euro 1.32, compared to euro 1.52 in 4Q03. Fully diluted net earnings per share decreased to euro 1.24 from euro 1.42.
DIVISIONAL RESULTS FOR THE QUARTER
BarcoView
Sales at BarcoView increased by 15% year-on-year, driven by the growth of 38% in the medical market. Internal growth in the medical market accounts for about two thirds of this increase, which again confirms Barco’s market leadership. The acquisition of Voxar, active in 3D medical software, in September 2004, accounts for the external part of the growth. The defense market performed 26% weaker than in 4Q03. More is still being spent on logistics rather than on innovative technology. In traffic management sales grew by 75%, thanks to better supply of components compared to the situation in 4Q03.
The book-to-bill ratio for the quarter was 0.74. Orders in the medical market have increased by 8%, despite the further decline of the US dollar. Orders in defense and traffic management, however, dropped sharply, mainly because of some particularly high orders in 4Q03.
Gross profit margin at BarcoView was 51.1% versus 48.7% the year before and 45% in 3Q04. EBITA margin was at 23% compared to 16% the quarter before and 18.9% in 4Q03.
Barco Media & Entertainment
Sales grew by 9% in 4Q04, mainly driven by a 23% increase in sales in the events market. Sales in the events market grew organically on a worldwide basis, while sales by Folsom, acquired in January 2004, continued its break-through in Asia and Europe. Digital cinema saw its sales increase by almost 200%, based on a very significant increase in Asia and also in Europe. Sales in the media market dropped by 14% versus the very strong performance in 4Q03.
The fourth quarter book-to-bill ratio for the division was 1.03, with a growth in orders in the events and digital cinema markets of 11% and 19% respectively. Media saw its order intake decline in 4Q04 because some orders moved towards early 2005.
Inventories were large because of temporary transitional simultaneous manufacturing of LED walls in China and in Belgium, and because of longer lead times of suppliers. This, together with the depreciation of the US dollar, impacted the gross profit margin, which was at 27.5% compared to 34% in 3Q04 and 35.6% in 4Q03. EBITA was further impacted by provisions for bad debt in the events market. For 4Q04 it was minus 7.1% compared to 9% the year before.
Barco Control Rooms
With euro 34.3 million sales Barco Control Rooms saw its sales grow by 22.5%. Sales were good worldwide in all segments, but especially in traffic & surveillance, while the process control market shows a growing interest in control room solutions.
Some orders have been shifting to 2005, which accounts for the low book-to-bill ratio of 0.76. In the meantime January 2005 proves to be a very successful month for orders in the control room market.
Although gross profit margin increased slightly from 42% in 3Q04 to 42.7 in 4Q04, it was still under pressure, especially in the the USA but also in the euro-zone. In 4Q03 it was 51.6%. EBITA grew from 8.3% to 14.5% consecutively, while the margin was 22% in 4Q03.
Barco Presentation & Simulation
At Barco Presentation & Simulation sales increased by 5.7% year-on-year, thanks to growth of 14.1% in the simulation market, in particular in the virtual reality segment. Sales in the presentation market declined slightly by 4%.
Book-to-bill ratio was at 0.96, with orders going down 12% in simulation and 22% in presentation.
Gross profit margin increased from 45% in 3Q04 to 46.5%. In 4Q03 gross profit margin was 51%. Gross profit was negatively influenced by the lower US dollar and by price pressure in the presentation market. EBITA margin grew to 13.2% from 7.1% in 3Q04. In 4Q03 it was 18.8%.
BarcoVision
Sales at BarcoVision increased year-on-year by 19.4%, with a good performance of the textile market and also of the plastics market.
Orders grew by 10.7%, but due to the high sales level the book-to-bill ratio was 0.89. The textile market still shows a delay in investments.
Gross profit margin grew from 45% in 3Q04 to 47.8% in 4Q04. It was 43% in 4Q03.
EBITA margin was 18.2%, thanks to the higher sales volume.
Barco Manufacturing Services
Sales and orders for the quarter approximately doubled compared to the same period the year before, driven by the internal reorganization of Barco Manufacturing Services. The consolidation of automatic soldering in two factories is now finalized.
EBITA margin at minus 0.1%, almost at break-even.
CONFERENCE CALL
Barco will host a conference call with investors and analysts on February 17, 2005, starting at 5 p.m. Brussels Time (11 a.m. EST), to discuss the results for the quarter. The call will be hosted by Mr. Martin De Prycker, Chief Executive Officer of Barco, Mr. Antoon Van Petegem, Chief Financial Officer and JP 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 8 p.m. Brussels time (2 p.m. EST).
ABOUT BARCO
Barco, an international company headquartered in Kortrijk, Belgium, 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. The company is active worldwide and has its own facilities for sales & marketing, customer support, research & development and manufacturing in Europe, North America and Asia Pacific.
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 “3 and 12 month period ended December 31, 2004”, please visit the Company’s website at www.barco.com
The accounting information taken up in this press release has not been reviewed by the statutory auditor.
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