1Q05 results confirm moderate growth and low EBITA margin while high growth in orders improves outlook for 2Q05
First Quarter 2005 Financial Highlights :
•Sales at euro 153.6 million, in line with management’s expectations of euro 150-160 million, and 3.0% up year-over-year.
•Orders at euro 172.4 million, exceeding expectations and up 12.1 %.
•EBITA at euro 6.4 million, in line with expectations of euro 5 to 10 million. EBITA margin down to 4.2% from 10.3% in 1Q04. EBITA includes euro 0.77 million for restructuring in Barco’s Media & Entertainment division.
•Net income at euro 4.9 million, from euro 10.0 million.
•Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense, divided by the average number of shares outstanding) of euro 0.40 versus euro 0.96.
•Net earnings per share decreased to euro 0.40, from euro 0.81 the prior year.
•Fully diluted earnings per share down to euro 0.37, from euro 0.76 in 1Q04.
Kortrijk, Belgium, 27 April, 2005 – Barco n.v. (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three-month period ended March 31, 2005.
Barco CEO, Martin De Prycker, commented: “Following previous investments in China we have now been able to decrease operational cost by reducing manpower in high-cost countries. This restructuring will result in a cost saving of euro 2.5 million over the remainder of 2005.”
“We also continue to invest in R & D to remain at the cutting edge of new technology and by doing so strengthen our market position. At the same time we further build out Barco’s Sales & Marketing teams for continued growth in particular in North America and Asia-Pacific. The efforts we have been doing in this respect in previous quarters have led to significant growth in sales in the above-mentioned areas. New products and better sales coverage will lead to higher sales and increased profit margins.”
“As expected Barco realized only moderate growth of 3% in 1Q05 against a further drop of the US dollar of 5% year-on-year. Price pressure in some of our markets resulted in a drop in gross profit margin to 40% for the whole of the company versus 44% the year before. Together with a higher cost of operations following increased Sales & Marketing and R & D investments, this led to an anticipated decrease of EBITA to euro 6.4 million.”
“1Q05, however, has also realized an increase in orders of 12%, resulting in a book-to-bill ratio of 1.12. This indicates a growth in sales, combined with the fact that management will continue to take all necessary steps in the organization and in the supply chain to improve the company’s margins.”
“For 2Q05 we anticipate orders to range between euro 180 and 190 million and sales between euro 170 and 180 million, which means further growth in both orders and sales. EBITA is expected between euro 14 and 19 million.”
CONSOLIDATED RESULTS FOR THE QUARTER
Sales
Sales for the quarter grew by 3.0% year-on-year to euro 153.6 million, in line with management’s expectations of euro 150-160 million. Four core divisions saw their sales grow: Control Rooms by 10.3% and BarcoVision by 6.5%. At Presentation & Simulation sales increased by 2.5% and at BarcoView sales grew by 1.5%. Sales of Media & Entertainment remained stable compared to the same quarter last year.
Sales to Europe, Middle East and Africa represented 52.1% of consolidated sales, while 31.0% of sales were realized in the Americas and 16.9% in Asia Pacific.
Orders grew 12.0% to euro 172.4 million, from euro 153.9 million in 1Q04, based on increases in orders in Control Rooms, Media & Entertainment and in BarcoView.
The book-to-bill ratio was 1.12 compared with 1.03 for 1Q04.
Book-to-Bill Ratio 
Gross Profit & Margin
Gross profit was euro 60.8 million, which is 7.7% lower than in 1Q04. Gross profit margin decreased to 40% from 44% the year before.
Operating Results before Amortization of Consolidation Goodwill (EBITA)
EBITA was at euro 6.4 million and in line with management’s expectations of euro 5 to 10 million.
General & administration expenses increased year-on-year as a percentage of sales to 8.4% of sales versus 7.6% the year before. Sales and marketing costs increased to 18.5% of sales from 17.2% in 1Q04, reflecting continued investment in market coverage in North America and Asia. With 10.4% of sales compared to the same percentage the year before, Research & Development expenses remained at the same level.
Other operating income improved to euro 3.0 million, from euro 1.9 million, due to positive currency adjustments. Other operating income includes a one time restructuring cost for BM&E (euro 0.77 million) and a one time gain on the sale of a building (euro 0.75 million). According to IFRS 2, share based payments are included in the profit and loss accounts from 2005 onwards. They have an impact of euro 0.156 million on the 1Q05 figures. 1Q04 figures are restated with an additional euro 0.075 million cost.
Goodwill amortization
According to IFRS 3, from 2005 onwards, systematic amortization of goodwill is discontinued. In 1Q04, euro 1.8 million goodwill amortization was booked.
Income Taxes
Income taxes decreased to euro 1.4 million from euro 3.9 million year-on-year.
Current earnings per share
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 decreased to euro 0.40 from euro 0.96 for 1Q04.
Net Income
Net income for the quarter decreased by 51.3% to euro 4.9 million, or a net margin of 3.2%, from euro 10.0 million for 1Q04.
Net earnings per ordinary share (EPS) decreased year-on-year to euro 0.40, from euro 0.81. Fully diluted net earnings per share were euro 0.37, compared with euro 0.76 during the same period.
Balance Sheet
At the end of 1Q05 Barco had a net cash position of euro 29.7 million, compared to euro 99.2 million at 31 March 2004 and euro 32.7 million at 31 December 2004. Noteworthy in this respect are higher expenditures in product development and an increase in inventory of euro 10.7 million, preparing for strong sales in 2Q05. Notwithstanding the absolute increase in inventory, inventory turns increased. Capex for the quarter was euro 3.4 million.
OUTLOOK FOR 2Q05
The following statements are forward looking and actual results may differ materially.
For the second quarter of 2005, Barco expects to achieve sales of between euro 170 and 180 million. This means around 2% growth.
Operating result before amortization of consolidation goodwill (EBITA) is expected to be between euro 14 and 19 million.
DIVISIONAL RESULTS FOR THE QUARTER
BarcoView
Sales at BarcoView increased with 1.5% year-on-year, driven by continued strong sales to the Medical market. Deliveries to the Defense and Traffic Management markets however, were weaker than in the previous year. In the medical market Barco is currently taking actions to reduce the risk of a possible shortage in supply in the next quarter.
The strong growth in orders in Medical and in Traffic Management led to a book-to-bill ratio of 1.10. Traffic Management has seen its first large successes in the Vessel Traffic Management in 1Q05. Orders in Defense & Security on the other hand were weak compared to 1Q04.
EBITA margin decreased to 7.8% versus 13.1% in 1Q04. Weak sales in the Defense market are partially responsible for this low margin. This market is expected to improve in the second half of the year. Profit margin in the Medical market remains healthy despite the negative impact of the September 2004 acquisition of Voxar. The profitability of this acquired 3D diagnostic software company, which is now close to break-even, is expected to continually improve throughout 2005. Gross profit margin remained relatively stable at 44.2% versus 44.5% in 1Q04, while Operating costs increased, partly due to the acquisition of Voxar.
Barco Media & Entertainment
Sales for the division remained stable vs 1Q04, with high sales in the Media market in Europe and Asia and good sales in the Events market worldwide. In the latter market projectors products did particularly well. Digital Cinema performed somewhat weaker.
In orders Digital Cinema continues to grow. Order levels for the Media market are particularly good in Europe and Asia, while in the Events market order level is driven by projector products and the new LED solution that can be used indoor and outdoor. The book-to-bill ratio was at a very high 1.21.
EBITA for this division was euro -0.8 million or -2.3% EBITA margin versus euro 2.0 million EBITA or 5.5% EBITA margin the year before. Excluding the one time restructuring cost incurred in March 2005, totaling euro 0.77 million, the division would have been close to break-even in 1Q05. The actions taken for cost-reduction are expected to result in cost savings of euro 2.5 million for the remainder of 2005. Gross profit margin was at 33.3% compared to 37.6% in 1Q04. EBITA and gross profit margin for 4Q04 were respectively euro -3 million and 27.5%.
During 1Q05 Media & Entertainment introduced the new indoor/outdoor LED solution.
Barco Presentation & Simulation
Sales at the Presentation & Simulation division grew by 2.5% versus 1Q04. The Simulation market had higher sales than the year before, but was still weak in the civil aviation market. The Presentation market suffered from price erosion in the mid-product range but enjoyed first sales of Barco’s new high-end projector.
Book-to-bill ratio was at 1.01, with orders 6.7% lower than in 1Q04, because of lower orders in the USA. Orders for the new high-end projector compensate for the price decline in the mid-range projector market.
Gross profit margin declined to 40.6% versus 45.6% in 1Q04. EBITA margin declined to 3.6% versus 5.7% the year before.
Barco Control Rooms
Control Rooms posted a good sales growth in its various markets, particularly in Asia and Europe. Total sales for the division grew year-on-year by 10.3%.
The book-to-bill ratio of 1.24 reveals the high demand for Barco control rooms. In 1Q05 orders grew by 32%.
Gross profit margin for the first quarter was 39.7% compared to 47.4% the year before, with EBITA margin down to 4.1% versus 10.6% in 1Q04. Cost improvement actions and shifting of the majority of manufacturing of control rooms to India, will result in a gradual improvement of margins.
BarcoVision
Sales grew in the first quarter with 6.5% thanks to some good orders that were booked in 2004.
In the systems business sales as well as orders suffer from the uncertainty in the textile market regarding the impact of the WTO agreements. Book-to-bill for 1Q05 was 0.86.
Gross profit margin increased year-on-year from 43.7% to 44.7%. EBITA margin improved to 15.5%, from 12% in 1Q04 thanks to higher sales and good cost control.
Barco Manufacturing Services
Sales at Barco Manufacturing were down 13% compared to 1Q04.
EBITA margin was at minus 4.7% due to lower volume and price pressure in electronic manufacturing. In order to grow profitability Barco will look into further reducing cost of operations.
CONFERENCE CALL
Barco will host a conference call with investors and analysts on April 27, 2005, starting at 4.30 p.m. CET (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 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. CET (4 p.m. EST).
CORPORATE GOVERNANCE
The draft of Barco’s Corporate Governance charter, in line with the “Code Lippens” will be available on www.barco.com by 1 May 2005, for discussion on the Annual General Meeting of Shareholders of 4 May 2005.
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. Barco is active worldwide and has its own facilities for Sales & Marketing, Customer Support, R&D and Manufacturing in Europe, North America and Asia Pacific. Barco is quoted on Euronext Brussels and is a BEL 20 and a Next 150 company.
For fiscal year 2004, Barco posted net sales of euro 671.9 million, with EBITA margin of 10.7%.
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 months ended March 31, 2005”, 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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