Continued strong demand for Barco products in 1Q06 fuels firm increase in profit
First Quarter 2006 Financial Highlights :
•Sales at euro 172.1 million, in line with management’s expectations of euro 165-175 million, and 12.0% up year-over-year.
•Orders at euro 199.6 million, exceeding the high end of expectations and up 15.8 %.
•EBITA at euro 9.3 million, at the high end of expectations of euro 5 to 10 million and up 44.1% compared to 1Q05. EBITA margin up to 5.4% from 4.2% in 1Q05.
•Net income at euro 7.4 million, up 51.3 % from euro 4.9 million in 1Q05.
•Current earnings per share (operating result before impairment of consolidation goodwill plus interest income/expense, divided by the average number of shares outstanding) of euro 0.61 versus euro 0.40.
•Net earnings per share increased to euro 0.62, from euro 0.40 the prior year.
•Fully diluted earnings per share up to euro 0.58, from euro 0.37 in 1Q05.
Kortrijk, Belgium, 26 April, 2006 – Barco n.v. (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three-month period ended March 31, 2006.
Barco CEO, Martin De Prycker, commented: “In the first quarter of 2006 we continued the strong growth in orders, which started in 2005, with an increase of almost 16% versus the same period of the previous year. Also sales did very well with a growth of 12%. This growth was supported by growing sales in the divisions View, Media & Entertainment and Presentation & Simulation. The divisions Control Rooms and Vision had a decline in sales, but their order intakes increased with 10% and 5% respectively.”
“The book-to-bill ratio for the first quarter is 1.16, indicating a further expected growth in sales. Sales growth was higher in the Americas and in Asia Pacific than in Europe, Middle East and Africa. America keeps increasing its relative weight in total sales of Barco.”
“Gross profit margin improved to 41.1% compared to 39.6% in the same quarter the year before, due to continued product cost improvements. EBITA grew with 44.1%. At 5.4% versus 4.2% the year before, EBITA margin remained fairly low as the positive impact of last year’s restructuring will only fully kick in, as of the second half of 2006 and increased sales will further increase EBITA. ”
“For the second quarter of 2006 we anticipate orders to range between euro 195 and 205 million and sales between euro 182 and 192 million, versus respectively euro 185.6 million and euro 176.9 million the year before. EBITA is expected between euro 15 and 20 million. In the second quarter of 2005 it was euro 15.5 million.”
CONSOLIDATED RESULTS FOR THE QUARTER
Sales
Sales for the quarter grew by 12.0% year-on-year to euro 172.1 million, near the high end of management’s expectations of euro 165 to 175 million. Three divisions saw their sales grow: BarcoView by 14.0% and Presentation & Simulation by 11.1%. At Media & Entertainment sales increased with 51.7%. The Control Rooms division had a drop in sales of 3.3%. BarcoVision saw its sales decline by 15.6% versus 1Q05. However, sales were exceptionally high in 1Q05, thanks to one important contract in the Middle East.
Sales to Europe, Middle East and Africa represented 49.7% of consolidated sales, while 33.4% of sales were realized in the Americas and 16.9% in Asia Pacific.
Orders grew 15.8% to euro 199.6 million, from euro 172.4 million in 1Q05, with all divisions except Manufacturing Services, contributing to this growth. Highest growth in order intake in 1Q06 was recorded in BarcoView and Media & Entertainment with respectively 26% and 24%.
The book-to-bill ratio was 1.16 compared with 1.12 for 1Q05.
Book-to-Bill Ratio
Gross Profit & Margin
Gross profit was euro 70.7 million, which is 16.3% higher than in 1Q05. Gross profit margin increased to 41.1% from 39.6% the year before.
Operating Results (EBITA)
EBITA was at euro 9.3 million and on the high end of management’s expectations of euro 5 to 10 million, due to continued product cost improvements. EBITA was up 44.1% compared to 1Q05.
With 8.2% of sales General & administration expenses remained stable year-on-year. Sales and marketing costs were at 17.3% of sales compared to 18.5% in 1Q05. Research & Development expenses went slightly up in absolute figures but were a bit lower in percentage of sales with 9.8% of sales versus 10.4 the year before.
Other operating result was euro -0.7 million versus euro 3.0 million in 1Q05. This is due to higher provisions for liability and bad debt based on the higher sales volume in 1Q06. Financial results constituted another negative influence on other operating results, due to a negative evolution in currency fluctuations in 1Q06.
Goodwill Impairment
As in 1Q05, no goodwill impairment was booked in 1Q06.
Income Taxes
Income taxes increased to euro 2.0 million or 21%, from euro 1.4 million or 22.7% the year before.
Current earnings per share
Current earnings per share (operating result before impairment of consolidation goodwill plus interest income/expense divided by the weighted average number of shares outstanding) for the quarter increased to euro 0.61 from euro 0.40 for 1Q05.
Net Income
Net income for the quarter increased by 51.3 % to euro 7.4 million, or a net margin of 4.3%, from euro 4.9 million for 1Q05.
Net earnings per ordinary share (EPS) increased year-on-year to euro 0.62, from euro 0.40. Fully diluted net earnings per share were euro 0.58, compared with euro 0.37 during the same period the year before.
Balance Sheet
With euro 173.7 million, accounts receivable were 11.8% higher than at 31 March 2005, in line with the increase of 12% in sales in 1Q06 versus 1Q05.
Inventory was at euro 154.8 million, stable compared to the same quarter in 2005, although orders grew with 15.8% in 1Q06.
At the end of 1Q06 Barco improved its net cash position to euro 40.0 million. At 31 March 2005 it was euro 29.7 million and at 31 December 2005 the net cash position was euro 22.0 million.
Capex for fixed assets and software for the quarter was euro 3.1 million.
OUTLOOK FOR 2Q06
The following statements are forward looking and actual results may differ materially.
For the second quarter of 2006, Barco expects to achieve sales of between euro 182 and 192 million versus euro 176.9 million in 2Q05. Orders are expected to be between euro 195 and 205 million compared to euro 185.6 million the year before.
Operating result before impairment of consolidation goodwill (EBITA) is expected to be between euro 15 and 20 million. In the same period the year before EBITA was euro 15.5 million.
DIVISIONAL RESULTS FOR THE QUARTER
BarcoView
Sales at BarcoView increased with 14.0% year-on-year, driven by world wide continued strong sales to the Medical market. The growth in this market with almost 40% versus 1Q05 confirms the strength of this market and further consolidates Barco’s market share. Sales in the Defense & Security market have improved to a certain extent compared to 1Q05, while in the Traffic Management market however, sales were weaker than in 1Q05 of the previous year, due to some delays in customer projects. Sales in Avionics grew strongly.
The strong growth in orders in the Medical and Avionics markets led to a book-to-bill ratio of 1.22. Medical orders grew significantly in North America and in Europe, in PACS and in custom imaging solutions. Orders in the Defense & Security market were slightly better than in the same quarter of the year before. Orders strongly declined in Traffic Management, due to some important customers’ decision to delay their projects. For the whole division orders grew with 26%.
Gross profit margin remained stable at 45.2% versus 44.2% in 1Q05 and with higher sales than the year before, EBITA margin increased to 8.7% from 7.8% in 1Q05.
Barco Media & Entertainment
Sales for the division grew very significantly with 51.7% vs 1Q05, mainly due to the Events and the Digital Cinema markets. Sales in the former of these two markets increased with more than 50%, with very good sales in projector products, while sales in digital cinema almost tripled.
Orders for the division grew 24% year-on-year. The Digital Cinema market continued to grow world wide, resulting in a strong order growth for Barco in this market. Order levels in the Media market were lower than in 1Q05 because the focus is put on projects with higher profitability. In the Events market a new projector type and a new LED solution that can be used indoor as well as outdoor have positively impacted the order level in 1Q06.
With the significant growth in sales in 1Q06, the book-to-bill ratio was high at 0.99.
Due to a different product mix the gross profit margin was at 31.2% compared to 33.3% in 1Q05. The EBITA margin for this division was 4.4% compared to -2.3% the year before, due to the positive impact of higher sales. Refocusing the Media business on more profitable niches in the market is expected to further improve profit margins.
Barco Presentation & Simulation
Sales at the Presentation & Simulation division grew by 11.1% versus 1Q05. The Presentation market showed a high demand for high resolution and high definition format projectors.
With orders for the division growing 17%, the book-to-bill ratio was at 1.06. Further backlog was built up both in the Presentation and in the Simulation business. In the Simulation market, especially oil & gas and flight simulation did well, with civil aviation showing positive signs for future growth.
At 39.6% the gross profit margin was lower than the 40.6% margin in 1Q05, due to a different product mix. The lower gross profit margin had a negative impact on the EBITA margin for the division, which was at 1.3% versus 3.6% the year before.
Barco Control Rooms
Although there was a high backlog, sales in the Control Room division decreased with 3.3%. This was due to delivery limitations in the 1st month of the year, caused by the introduction of the new ERP system in January 2006.
With a growth in orders of 10% in 1Q06 the book-to-bill ratio grew to 1.40, thus further increasing the backlog.
Gross profit margin for the first quarter was 40.0% compared to 39.7% the year before. EBITA margin was weak at 0.3% versus 4.1% in 1Q05, due to lower sales.
BarcoVision
Sales decreased with 15.6% versus 1Q05, in which quarter however, sales included one very significant contract in the Middle East. In 1Q06 sales were particularly weak in the sensor market for open end spinning.
Orders grew with 5%, leading to a book-to-bill ratio of 1.08. In this way some backlog was built up, although the investment climate remains weak in the textile machine market.
Gross profit margin remained stable year-on-year at 45.5% versus 44.7% in 1Q05. EBITA margin decreased to 6.8% from 15.5% the year before, due to the low sales volume.
Barco Manufacturing Services
Sales at Barco Manufacturing were down 17.4% compared to 1Q05, as internal Barco customers emptied their inventories.
Orders were picking up again, resulting in a book-to-bill ratio of 1.34 and significantly increasing backlog.
EBITA margin was at 2.4%, up from -4.7%, thanks to re-organisation and manpower reduction carried through in 2005.
Discussions with several parties focusing on subcontracting as their core business and interested in acquiring Barco Manufacturing Services or parts thereof, are ongoing.
SHARE BUY-BACK PROGRAM
Barco did not buy back any of its own shares during 1Q06. The company now owns 383,320 of its own shares through a share buy-back program started in 2003.
CONFERENCE CALL
Barco will host a conference call with investors and analysts on April 26, 2006, 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 by 8 p.m. CET (2 p.m. EST).
ABOUT BARCO
Barco, a global technology company headquartered in Kortrijk, Belgium, designs and develops visualization products for a variety of professional markets. Barco has its own facilities for Sales & Marketing, Customer Support, R&D and Manufacturing in Europe, North America and Asia Pacific.
For fiscal year 2005, Barco posted net sales of euro 712.0 million.
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, 2006”, 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.
1Unless otherwise indicated, all financial and operating data discussed in this announcement are in accordance with IFRS and in million of Euro. Tables state figures in thousands of Euro, unless otherwise noted. Unless otherwise stated, all comparisons are between the three-month period ended March 31, 2006, and the equivalent three-month period ended March 31, 2005.
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